The travel insurance sector is braced for closer scrutiny on how it handles claims – and whether the fine print in contracts is fair to customers.
The Australian Securities and Investments Commission is planning a review of the travel insurance market in the face of increased disputes, particularly over the use of exclusions for medical conditions.
Travel insurance is one of the most complained about financial products, ASIC’s executive director for financial services, Michael Saadat said.
And he maintained the wording in travel insurance policies often made it difficult to make a claim.
ASIC is set to gain the power to scrutinise claims-handling as a result of the Hayne Royal Commission, which recommended a shake-up of how the industry is regulated. This will mean that insurance companies will lose their exemption from unfair contract laws.
“Often, the exclusions contained in insurance policies, travel insurance policies in particular, are quite broad,” said John Price, lead ombudsman for general insurance for The Australian Financial Complaints Authority (AFCA).
He recommended that there should be a “minimum cover regime” where insurers had to provide cover set at different levels including basic, intermediate and premium.
However, many conceded that travellers fail to declare their pre-existing medical conditions because they don’t read the small print in the policy’s terms and conditions.
Many simply do not understand their travel insurance cover with up to 42 per cent admitting they do not read their policy’s terms and conditions according to research by Choice magazine, a consumer advocacy body.
Other common disputes include claims for stolen luggage where the insurer says the bags were left “unattended”; loss of expensive jewellery that was not declared when taking out the policy and injuries to unlicensed motorbike riders.