Daily briefing: Thursday - Travel insurance under scrutiny again

The travel insurance sector took another blow as a Which? investigation criticised insurers’ use of ‘get-out’ clauses, which leave some policyholders without cover.

The report said that many insurers include ongoing medical warranties or change-in-risk clauses in policies, meaning they can pull cover even if a policyholder has medical advice that they can still travel.
Almost one-third of policyholders that reported a new medical condition to their insurer had their premiums hiked or cover removed, the report said.

Unhappy travellers

Travel insurers have had a tough time over the past year. The sector has seen a rise in complaints to the Financial Ombudsman Service, which is now dealing with 40-50 complaints a month regarding the ‘get-out’ clauses, compared to around 20 per month three years ago.

Complaints to the FOS about travel insurance do not stop there. The watchdog also handled 600 consumer travel insurance complaints about the volcanic ash cloud last year, leading to a great deal of negative publicity for the sector.

ABI figures also show that the cost of medical expenses claims against travel insurers soared by 270% in the last six years.

Combating confusion

The travel insurance industry has a big task to clear its name, but perhaps part of the answer lies in insurers and intermediaries better educating the public about exactly what their policy covers and the benefits of travel insurance generally.

Confusion over cover was noted as an issue by the FOS in 2010, when the watchdog revealed that the majority of travel insurance complaints came from customers having a claim turned down that they thought was legitimate. Many of these claims will undoubtedly relate to issues that were never covered under the policy wording.

Education on the benefits of travel insurance is particularly relevant, considering that the Which? report also found that an astonishing 25% of travellers think the UK government will pay out if something goes wrong while they are on holiday.

Cobra members rewarded

Some of Cobra Network’s members had a windfall of shares in Cobra Holdings after a number of its brokers qualified for a profit share from business written in 2010, according to a stock exchange report.

This could be seen as a vote of confidence in the future share prices of the business – which has been dogged by rumours of sales of its various arms – as its members could easily have taken their profit share in cash.