Travel insurance: beware bogus clauses which deny your claim

After years of paying for travel insurance with Travel Insurance Direct, the time finally came to make a claim. My daughter had a skiing accident and ended up in a hospital in Japan. She was discharged on crutches. The doctor provided the requisite documents for the insurance claim. A few weeks later, the claim was duly lodged with TID.

This was by no means a fastidious claim; no losses for ski-hire, taxis or lift-tickets, just a $400 hospital bill. The insurer, however, made things hard. Among its demands was evidence that skiing had actually occurred, lift tickets that is. We responded there was no such thing as a lift ticket any more, only an electronic pass which had to be inserted in a machine at the end of the day in return for the deposit.

Life marched on. We didn’t bother pursuing TID due to the of spectre further finicky demands. The insurer’s pettifogging had worked, but only to a point. While this claimant had drifted away, so had a good customer, a customer with a history of paying for insurance policies and making no claims against them. That was three years ago.

Everybody has a travel insurance story. But is anybody aware that travel insurance policies – even from top line institutions such as Westpac, NRMA, APIA and Australia Post – contain exclusion causes which may not be legally enforceable? Many Australians could be deterred from making insurance claims, and many insurers may be waving away claims, based on spurious policy clauses which don’t stack up in law. Moreover, it is likely that many insurance companies are in breach of their financial services licences and engaging in misleading and deceptive conduct. Eliot Barham reports.

Many popular travel insurance policies contain exclusion clauses which are likely to be unenforceable under Australian law, a new report from Sydney University has revealed.

The report by Joe Campbell, formerly a judge on the NSW Supreme Court of Appeal and now with the University of Sydney Law School, found clauses which related to the insured not disclosing something to the insurer were unenforceable as they gave the insurer rights which were wider than the statutory consequences of failing to comply with the duty of disclosure.

“Many exclusion clauses in standard forms of travel insurance mass-marketed in Australia are unenforceable,” writes Campbell in the Insurance Law Journal.

Further, clauses about “pre-existing medical conditions” were found to exclude customers who were not aware of such conditions when taking out the policy, contrary to the Insurance Contracts Act.

Several large companies including APIA, Australian Seniors, and Westpac are singled out by the report for having clauses in their contracts which are more restrictive than legally required. However other policies, including those by NRMA and Australia Post, were underwritten by the same insurer and contain “relevantly identical” terms.

Joe Campbell

In one Travel Insurance Direct (TID) contract analysed by Campbell, a “pre-existing medical condition” includes “a medical condition that had been investigated or treated by a health professional at any time in the past, any condition for which prescribed medicine was (currently being) taken, and any condition for which the proponent had (ever) had surgery”.

“Under that definition, the majority of the adult population would have a pre-existing medical condition,” said the University of Sydney study.

Under current regulations, any insurer who sells to the public is already subject to a misleading and deceptive conduct provision under the terms of the ASIC Act as a part of its financial services license.

The report says companies are “likely” to be contravening that provision by issuing insurance contracts which contain unenforceable exclusion clauses.

While insurance companies often knock back claims when they are first made, demanding further evidence and documentation, it is not uncommon for them to honour the claim once the insured pushes back.

Yet critics say “ordinary consumers” would have no clue that these policies did not really mean what they said.

The report also takes aim at the Financial Ombudsman Service for suggesting travellers’ rights depend on the terms of the insurance contract, without noting those terms might not be enforceable.

Last week, the federal government announced its intention to tailor Unfair Contract Terms (UCT) laws in the ASIC Act so they  could accommodate specific features of insurance contracts.

Treasury says the proposed model will ensure consumers and small businesses “have the same access to protection from unfair terms in insurance contracts as they do for other contracts for financial products and services”.

The Insurance Council of Australia however, has already hit back, releasing a statement which argues there is “no compelling evidence” UCT protections would benefit consumers.

“If implemented, it would cause insurers to fundamentally review their contracts and reassess their pricing,” said Rob Whelan the chief of the peak body.

Eliot Barham

Eliot Barham is presently an intern with the ABC’s investigations unit. He has worked as a casual producer with Radio 2UE, and is working on a data project with michaelwest.com.au.