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Travel Insurance
Why is Travel Insurance important?
The Travel Insurance is an important adjunct to travel,
particularly package travel, tours and cruises.
Many tour and cruise packages highlight the advisability of
travel insurance in their booking conditions, using words to
this effect:
"We strongly recommend you take out travel insurance
before travelling."
Travel Insurance is sold by travel agents, credit providers
and transporters as an "add-on" to the travel, tour or
cruise. Travel insurance is also sold as an adjunct to
business insurance, to cover travel by key personnel. Travel
insurance can be purchased for specific travel, such as an
airflight, for the duration of a tour or for a period of
time, such as annually. The commission paid by the insurer
to the seller of travel insurance can represent a
significant source of income for the travel agent.
For the travel consumer, travel insurance can alleviate the
expenses of many of the risks associated with travel. The
principal risks are:
i. cancellation before and during the travel;
ii. loss of baggage, personal effects, cash and credit cards
during the travel;
iii. medical, hospital and dental expenses during the travel
(outside of the home country);
iv. emergency expenses, repatriation and accidental death
during the travel; and
v.delays or substituted travel arrangements during the
travel.
Travel insurance claims are paid where a risk materialises
which is outside of the control of the travel consumer.
Coverage is limited to the risks for which insurance is
taken out. The cost of insuring for each of these risks
varies according to the nature of the risk and the level of
coverage required.
What do you look for in choosing a travel insurance
policy?
The travel consumer must:
i. Choose the risks desired to be covered, with a view to
the type of travel (luxury, adventure, organised tour),
place of travel (Australia, Europe, Middle East, Asia, North
& South America), and personal circumstances (age, fitness,
health).
ii. Check the conditions and exclusions: if the travel or
tour includes high risk or adventurous activities such as
scuba diving, ballooning or sport, are claims resulting from
these activities excluded? Is luggage left overnight in a
rental car excluded?
iii. Choose the level of the coverage for those risks where
limits apply, such as loss of baggage, medical and hospital
expenses. Take into account also the limited compensation
available from airlines and cruise operators.
iv. Disclose pre-existing medical conditions and dangerous
activities to be engaged in to the insurer and if the
insurer accepts these risks, pay the extra premium.
Otherwise, no coverage will exist even though the premium
has been paid.
v. Be aware of any travel insurance available as a benefit
of purchasing travel using a credit card or through an
employer s policy and the necessity to obtain separate
insurance for rental car hire. Check if the travel insurance
purchased requires a claim upon these policies or requires a
claim upon an airline, cruise operator or hotel first.
Travel Insurance Policies: Conditions and Exclusions
Constant themes running through the disputes are the failure
of consumers to read the policy and their over optimistic
expectations of the cover. (from an Annual Report of
Insurance Enquiries & Complaints Limited).
Travel insurers make extensive use of conditions and
exclusions in their policies both to limit claims by placing
a cap on liability and to exclude claims in circumstances
where the travel consumer is at fault.
The conditions and exclusions contained in the travel
insurance policy are the major reason travel insurers use to
refuse claims by travel consumers.
Travel Insurance policies are similar around the world both
in terms of coverage and in terms of conditions and
exclusions. Many are based on the American Home Assurance
Policy Form, with fine tuning to the terms of the conditions
and exclusions.
Travel Insurance Claims: What must the travel consumer
do?
Claims for compensation must be made by travel consumers
according to the travel insurance policy. These comments are
made:-
i. Notification of the loss or injury to the insurer at the
earliest opportunity is always the best advice a travel
consumer can follow.
ii. Claims such as compensation for lost or delayed baggage,
injuries, emergency expenses, repatriation will be
recognised only if the insurer is notified before purchasing
replacement baggage or incurring expenses. Where items are
stolen, a report must be filed with the local police.
iii. The insurer s claim form should be completed or a
letter sent with full particulars of the claim, including
receipts for items and expenditure claimed.
Airlines, cruise ships, The Travel Compensation Fund and
credit card providers, should be pursued (where relevant) at
the same time as the insurance claim is made, as the insurer
will pay only what cannot be recovered from these sources.
Time limits can be important. Note for example, that claims
for baggage damaged or contents lost by an airline must be
made within 7 days, (if it is wholly lost then within 21
days) of the event.
Travel Insurance Claims: The Code and the Scheme
The following statistics for the 1998 calendar year in
Australia provide perspective:-
travel insurance policies issued (including renewals):
1,279,054
- claims made: 108,230
- disputes referred to the Panel: 974
Travel consumers in Australia are assisted in making claims
and resolving disputes with insurers by the General
Insurance Enquiries & Complaints Scheme, in which all travel
insurers participate.
The Scheme is administered by Insurance Enquiries &
Complaints Limited which oversees two procedures for dealing
with insurance disputes in general, and travel insurance
disputes in particular:-
i. A Code of Practice for insurers to follow when dealing
internally with claims made by consumers; and
ii. A dispute resolution service for resolving disputes
between travel consumers and travel insurers, administered
by an Insurance Claims Review Panel.
The Code of Practice:
Once a claim is made, the desire of the travel consumer is
to obtain a final decision from the insurer, as quickly and
as satisfactorily as possible.
Under the Code of Practice, the insurer must promptly
consider the claim, keep the consumer informed of the
progress of the claim and act in a professional manner.
Complaints can be made to Insurance Enquiries & Complaints
Limited if an insurer fails to deal with the claim according
to the Code. The threat of making such a complaint will
usually be effective.
Claims Review Panel:
A travel consumer who is dissatisfied by the final decision
of an insurer in response to a claim may make an Application
for review of the decision to the Claims Review Panel. These
comments apply:-
i. The Application must be made in the prescribed form
within 3 months of the decision. The Application is free.
ii. The Claims Review Panel will investigate the
Application, and determine the dispute on the paperwork
provided in the Application and in the insurer s file,
usually without a hearing at which anyone attends.
iii. When the Claims Review Panel issues its decision, the
travel consumer has 20 days within which to accept or reject
the decision.
iv. If the travel consumer accepts the decision, then the
insurer must make the payment within 15 days of an agreement
being signed.
v. If the travel consumer rejects the decision, then they
are entitled to litigate in the courts or pursue claim in
the Consumer Claims Tribunal, with the proviso that the
insurer need not keep to the decision either.
vi. The Claims Review Panel can only assist if the travel
consumer has pursued their complaint with the insurer and is
dissatisfied with its decision on the claim.
vii. Although a travel consumer may litigate at any time,
the cost and delay of litigation make it unattractive to do
so while the Panel is considering the Application.
Examples of disputes determined by the Panel:
These are a selection of case summaries of disputes decided
by the Claims Review Panel:
Lost Luggage:
Case 973732: The claimants left two suitcases in the boot of
their car which was backed into a space under a concrete
ramp (to prevent the boot being accessed) in a security -
patrolled carpark in Calgary, Canada. The thieves gained
access through the rear seats and stole goods worth $5,000.
The Panel refused the claim because of the exclusion in the
policy of "items left unattended in any motor vehicle
overnight (even if in the boot)", which applied regardless
of the reasonable precautions that were taken.
Case 974442: The claimant was travelling by London
Underground train from Heathrow Airport to London. His
suitcase was placed next to the allocated baggage area
(which had approx. 20 suitcases). The claimant was seated
within arms length and within sight of the suitcase. The
train was very crowded and the suitcase was stolen at one of
the stops in the confusion. The Panel allowed the claim. It
decided that the suitcase was not unattended because it was
within reach and eyesight and therefore the exclusion in the
policy did not apply.
Cancellation expenses:
Case 973558: The claimants had booked a 5 day/night cruise
to the Galapagos Islands. Before the cruise, another boat
was substituted with an itinerary which did not include
seeing "giant tortoises in the wild". Expenses of an extra
trip for this purpose and cancellation of a trip to Peru
which could no longer be taken because of the extra trip
were claimed. The Panel denied the claim because of the
exclusion in the policy when "a member of the travelling
party decides to change or not to continue with the trip".
Compensation for the shortfall in the trip lay with the
travel agents involved (who had already given some
compensation).
Additional Expenses:
Case 974062: The claimant was seriously injured in a car
accident and hospitalised in California. The claim was for
the additional expenses of travel, accommodation, telephone
calls and meals of both parents, who had been told by the
hospital that "they should came to California to be with
him". The policy did cover additional expenses of these
kinds. The parents applied to the insurer for the additional
expenses before leaving, but were refused. The Panel decided
the insurer s refusal was unreasonable and allowed
additional expense reimbursement (as claimed) but for one
parent only.
Pre-existing medical condition:
Case 973412: The claimant had consulted his doctor on 25
July complaining of back pain, took out travel insurance on
7 August and became incapacitated with back pain on 3
September. The Panel denied the claim for cancellation costs
because the illness was pre-existing and not disclosed to
the insurer. The Panel allowed the claimant's daughter s
claim as she could not be expected to be aware of her father
s pre-existing illness.
CORDATO PARTNERS WILL
Advise and assist travel consumers:
i. on the interpretation of the conditions and exclusions in
the policy to decide whether a claim is possible and the
requirements to make a successful claim.
ii. in drafting replies to requests for further information
for consideration of a claim by the travel insurer and
assisting in the application to the Claims Review Panel.
iii. to pursue court proceedings for recovery of the claim.
Advise and assist the travel agent and tour operator:
i. on proper practice on the sale of travel insurance to
travel consumers.
ii. on their responsibilities to travel consumers where the
travel insurance is insufficient or claims are denied due to
faulty explanation of the policy by the travel agent.
iii. in defending claims and court proceedings brought by
travel consumers and travel insurers.
Advise and assist the travel insurer:
i. in drafting replies to claims made by travel consumers,
and defending applications to the Panel and Court
proceedings;
ii. in drafting and modifying conditions and exclusions, and
travel consumer notifications in travel insurance policies;
iii. in pursuing claims for reimbursement against airlines,
cruise lines, tour operators and accommodation providers. |
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