First published in ITIJ 92, September 2008
David Craik examines some recent cases where travel insurance small print has come under fire from consumers
It was not only teenager James Pinnington’s body that hurt after crashing his scooter during his recent gap-year trip in Vietnam. His physical ailments, including two broken legs, a fractured vertebra and internal bleeding will heal, but he is still unsure whether he will ever receive payment from his insurance company to cover the £25,000 cost of his medical care and his flight home to the UK.
Pinnington's father had purchased a comprehensive policy from high street retailer Boots, which offered up to £10 million for medical claims and repatriation expenses. However, Boots refused to cover his son James's costs because it stated that although he was wearing a helmet at the time of the crash he did not have a full, valid UK motorcycle licence. This exclusion was contained in the policy document but according to the Pinningtons, this was in very small print on page 14 of a 50-page booklet.
A spokesperson for Boots told ITIJ in a statement: “Boots have investigated Mr Pinnington's claim. Our Gap Year Insurance policy wording clearly states that a claim will not be paid arising from using a two-wheeled motor vehicle as a driver or passenger if you are not wearing a crash helmet and the driver is not a holder of a full UK category motorcycle licence.”
The insurance underwriters of the policy, AIG UK, did not wish to add to this statement. It is continuing to liaise with the Pinningtons about their complaint.
Also seriously injured in a moped crash this summer was British teenager Charlotte Robinson (See page 1). She fell from the back of a vehicle in Malia, Crete and her injuries left her connected to a life support machine. Her insurance company Atlas Direct has refused to cover the £20,000 cost needed to bring her back home to the UK. It said that as Robinson had been drinking alcohol, even though she wasn't driving, her policy had been invalidated. Her family is fighting this stand and demanding proof from the hospital that their daughter had been drinking.
the majority of disputes are based around clauses for pre-existing health conditions and cancellations
Two different cases, but both highlight unhappy customers perceiving an unfairness in certain exclusions of travel insurance policies and the way they are communicated to policyholders.
How many holidaymakers when travelling round the Caribbean and Bali have hired and driven a moped without owning a UK motorcycle licence? And while no one should condone irresponsible drinking, are holidaymakers expected to remain teetotal for their whole trip for worry of not being covered? Are certain exclusions both unfair and unrealistic?
Boots is not the only insurer to have a clause relating to mopeds and the need for a UK licence. Barclaycard Travel Insurance and Swiftcover are amongst those that also have one. And there are other examples of contestable exclusions in travel insurance policies from around the world. The most common relate to extreme sports, complications or sickness arising from pregnancy, exclusions for certain illnesses and personal accident cover for people over a certain age.
Cover is also restricted to having been resident in the country of purchase for a certain amount of time in a year. One policyholder with a US travel insurer did not get cover for a claim after he cancelled a holiday upon discovering that his mother had been diagnosed with cancer. The insurer did not pay because his mother was not a US citizen and lived abroad.
The UK's Financial Ombudsman Service (FOS) has dealt with a number of exclusion complaints, with the majority of disputes based around clauses for pre-existing health conditions and cancellations.
One example involved a man who had collapsed and had been told by a doctor that the reason for this was a migraine. However, he was advised that a brain scan should be booked as a precaution. In the meantime, the man bought a holiday and a travel insurance policy. He then had the scan and was told that he had suffered a minor stroke and should not travel. He cancelled his holiday, but the insurer rejected his claim for cover because of an exclusion which stated ‘any condition of which the policyholder was aware at commencement of the policy’. The FOS judged the insurer's decision as neither fair nor reasonable.
Another example was a woman who had to curtail her holiday after learning that her father had been admitted to hospital suffering from liver disease after years of alcohol abuse. There was no cover because of a clause stating the insurer would not pay for 'claims arising from the influence of intoxicating liquor'. The FOS decided that it was unfair to apply this clause in this circumstance.
it is reasonable for holidaymakers to get training or to get some local insurance at their destination which won't insist on UK driving standards
So are insurance companies going too far? Marc Gander of the British customer watchdog the Consumer Action Group says that insurance companies are ‘totally entitled to impose any conditions they want’. He says it is up to customers whether to accept them or not. Specifically on the Pinnington case he adds: “Lots of people use mopeds when they go abroad. They are vulnerable when they do so, especially in a country such as Vietnam where the road conditions are probably much poorer, as is the general driving behaviour. It does not surprise me in the slightest that insurance companies want UK driver training as a minimum standard. It is a higher risk for them if people are not licensed. It is reasonable for holidaymakers to get training or to get some local insurance at their destination which won't insist on UK driving standards.”
However, he backs the Pinnington's claims that the exclusion was not adequately communicated to them. “I've talked to the father and seen the document,” he explains. “The insurance policy is in two parts. There is the Terms and Conditions (T&Cs) and a Key Facts document. In the T&Cs, the exclusion is there, but despite the Key Facts part listing certain extreme activities which are not covered, there is no mention of mopeds or the need to have a UK licence. The insurers were wrong not to have it there.”
Gander reasons that as the insurance was clearly targeted at young people, the insurance company should have recognised that when they go abroad they will use mopeds. “It was not brought to James's attention properly. It should have been more prominent. Young people do not always go through all the Terms and Conditions. They read the key facts and think that sums up everything they should know and they are reasonable to believe that. They were out of order not to have it in the key facts,” says Gander.
Lessons to be learned
Gander adds that there is a lesson for all travel insurers from this case: “Insurers are entitled to put whatever conditions they want [in the policy], but they are obliged to call them to the attention of the customer in a way that addresses the target market. There has also been a criticism of insurance policies for many years that the language that is often used is not accessible. Insurers have a duty to make it accessible and tailor it to whoever they are addressing.”
Malcolm Tarling, spokesman for the Association of British Insurers, did not want to comment on the Pinnington case, but stresses the importance of insurers making relevant terms and conditions clear to potential customers at the point of sale. “This is a requirement of the Insurance Conduct of Business Rules overseen by the Financial Services Authority,” he says. “It is important for customers to understand what they are covered for. It is not just about reading the policy, but understanding and comparing the cover available under travel policies provided by different insurers.”
Lorraine Moberley, underwriting director at UK and pan-European travel insurer the Professional Travel Insurance Company, also puts the onus on the policyholder. “They should be a little more responsible in their actions. If they are illegally driving a moped in a foreign country they should not expect to be covered under a travel policy as they are exposing the insurer to an additional risk,” she says. However, she stresses the importance of insurers making their policies understood. “We highlight the main exclusions in our Key Facts document, which is a policy summary with the main cover, exclusions and limitations. There is always only so much you can define, but we aim to make our policies as clear as possible.” She adds that complaints from customers are generally not made about the unfairness of exclusions but about the evidence needed to support their claims.
travel insurance is not designed to cover the consequences of your reckless actions
Tarling says: “All travel policies contain restrictions, conditions and exclusions. This is why travel insurance remains very competitively priced. It is designed to cover events outside of your control. It is not designed to cover the consequences of your reckless actions. So travel insurance may not pay out for any claim resulting from the customer getting drunk. Travel insurance is mainly sold off the shelf with no individual underwriting. These standard policies are suitable for most. but people should check that the cover they are being offered reflects their needs and circumstances.”