On 16 May 2016, Shane purchased a travel insurance policy to cover his and his family’s four day trip from the South Island to Wellington later in 2016.
However, in early August 2016, Shane received notice from the IRD that he needed to make immediate payment of $15,700. As a result, Shane could no longer afford the holiday in Wellington and he cancelled the trip and made a claim for his cancellation costs under the insurance policy ($700 in flight costs). Shane was able to recoup the cancelled accommodation costs.
The insurer declines the claim
Shane’s insurer declined his claim. The insurer agreed it was unintended, unexpected and outside Shane’s control that he would receive such a high IRD bill which was due to a law change around overseas pension transfers.
However, there was an exclusion clause in the policy saying that the insurer would not cover cancellation costs or lost deposits if a claim arose because of any business, financial, or contractual obligations.
The insurer said Shane cancelled the Wellington trip because he was no longer able to afford it, due to his financial obligation to pay the IRD. Shane did not accept the insurer’s decision and complained to FSCL.
Shane’s complaint
Shane said he could understand that the policy set out what was covered and what was not, however he felt that when he purchased the insurance online he was only given one policy option. Shane felt he should have been given several policy options, or if one option was given it should be explained that the policy would not necessarily cover all claims. Shane said he had taken out the policy in good faith, and he should have cover for his claim.
Our conversation with Shane
We told Shane and said it was highly unlikely we would uphold his complaint. We explained that it was irrelevant whether Shane should have been offered more policy choices, because it is highly likely any policy he chose would have the same financial exclusion.
Also, Shane had a 14-day free look period with his policy, and he could have read it to make sure it met his requirements. Unfortunately, Shane had not read the policy.
It appeared Shane’s decision not to take the trip was a ‘change of mind’ and the policy did not cover claims arising from a change of mind or disinclination to travel.
We told Shane that people take out insurance to cover unexpected events, but no insurance policy will cover all eventualities.
Shane was disappointed but decided to withdraw his complaint. It was clear his complaint was not going to be upheld and he was prepared to accept that.
Our insight
Often it is clear very early on to our case managers that a complaint is not going to be upheld, for example where there is a clear exclusion clause excluding an insurance claim, or where we have investigated a very similar complaint before which was not upheld.
In these cases, the case manager will often call the complainant before starting a formal investigation of the complaint to discuss whether the complainant wants to continue pursuing the complaint.
Many complainants will decide to discontinue their complaint once they are satisfied that it is unlikely their complaint will be upheld.
