Last year, more complaints about travel insurance – made to the Financial Ombudsman Service (FOS) – were upheld in favour of the consumer than for any other major type of insurance, a Which? Travel investigation has found.
The FOS ruled that consumers had been treated unfairly in nearly four out of every 10 travel insurance cases it assessed. By contrast, health and contents insurance customers were only unfairly treated in just over a quarter of cases.
Our investigation found that, in too many cases, claims handlers split hairs over small print, apply unfair exclusions and use delaying tactics to try to wriggle out of paying out on legitimate travel claims.
The situation is so bad that, in 2017, FOS received a record number of travel insurance complaints.
The travel insurers that won’t pay out
FOS travel insurance complaint data for 2017 shows that, while some insurance providers are mostly making the right decisions, others are falling seriously short of industry standards.
Nearly half of customer complaints brought against Mapfre, a multinational insurance group, were upheld by the FOS.
The uphold rates for IPA and URV were also well above the travel insurance industry average of 38%.
Mapfre told Which? Travel that the volume of cases upheld by the FOS is very low compared with the volume of claims it received and processed. Both IPA and URV said they had been working with the FOS to improve their uphold rate.
The murky world of travel insurance
While Mapfre, IPA and URV might not be household names, that doesn’t mean they don’t provide your cover. While insurance brands, such as All Clear and Holidaysafe, market and sell the policies, cover is often provided by another insurance group – usually a large multinational organisation like Mapfre, commonly referred to as the ‘underwriter’.
It is the underwriter, and the claims handlers it employs, that is ultimately responsible for handling your case. It decides whether to accept or reject a claim, the hoops you’ll need to jump through, and how much to pay out if the claim is successful.
The relationship between insurance brands and underwriters is crucial, yet it remains largely hidden from consumers.
Confusingly, this doesn’t mean that you should avoid insurance brands that partner with the worst-performing underwriters. Some brands told us they retain oversight of the service offered by their underwriter. And Which? continues to recommend some of these insurance brands, because they offer comprehensive cover and score well on customer satisfaction.
We investigated more than 120 complaints to find the most common reasons insurers used to delay or refuse to pay claims.
More than a quarter of the upheld complaints we looked at related to undeclared health issues. Insurers tend to exclude claims that can be related to previous illnesses. The problem is that they don’t always make it clear what counts as a pre-existing condition, and may try to stretch the definition to suit their needs.
And, more confusing still, it’s not just your own medical history that you have to consider. Most policies offer cover for a cancellation due to a family member or travel companion becoming ill – as long as it’s not the result of a pre-existing health issue.
In a further 10% of the upheld cases we examined, insurers tried to avoid paying out because the customer had attended the wrong type of hospital. Treatment in a private hospital is excluded from most insurance policies. But FOS data shows that underwriters do not always apply this exclusion fairly.