Travel Policy Excess

I received an email from a broker who had a clients Hire Vehicle Claim denied by their Insurer with the following explanation:

Please note that under the travel insurance policy we only cover the excess waiver fee charges not the repair costs, therefore we are unable to cover the members claim on this occasion as it is not covered under the terms and conditions of their policy.

The broker, thought, rightly in my opinion, that this is a little unfair.

Hi Allan,

Can you please provide your advice on the following denial.

Our client purchased a travel insurance policy through [name withheld] insurer which includes a $3,000 hire vehicle excess waiver.

They hired a vehicle in the USA.

The rental agreement included motor insurance with a $1,000 USD excess.

They had a single vehicle accident in their hire car in USA with the repair costs being $698 USD.

As the repairs are under the excess amount, [the insurer] have advised there is no claim.

In my opinion the policy does not spell out how it will respond in the event that the repairs are under the excess.  It does state that the hire vehicle excess waiver cover is not in place of rental vehicle insurance and only provides cover for the excess component up to the applicable limit (pg 29).   However the client did have rental vehicle insurance, it’s just, in this case, unfair that his damage is not $1,001 so he would not be out of pocket.

Can you see any way this should be covered.

I hate it when insurance is clearly unfair and I think this is a great example !

Thanks

Sandra [surname and email provided]

I responded to this broker with the following opinion:

Crash toy cars isolated on white backgroundHi Sandra

I refer to your email seeking an opinion on how the vehicle hire excess coverage should be treated when the claim lodged by the Insured falls below the coverage Sub-Limit for Hire Vehicle excess and the excess set in the hire car company contact of hire.

The purpose of an excess is that it is to have the Insured bear the first portion of any loss up to the amount of the excess specified in the Policy.

With higher and higher excess being applied by hire vehicle companies and then charging an exorbitant rate to remove the deductible, the general insurance industry introduced coverage under corporate travel and other forms of travel insurance policies to cover the exposure for their Insureds for the vehicle hire excess. Such coverage typically has a Limit or Sub-Limit of Liability. Here it is $3,000.

The way this coverage is designed to work is that any claim which the Insured has to meet for damage to a hire car due to the application of the excess, will be met by the travel policy up to the relevant Limit or Sub-Limit stated in the policy.

In the case of the [insurer] policy, it defines what an excess is as follows:

“An ‘excess’ is your contribution towards the cost of a claim… “

This is perfectly in line with the standard definition of an excess as I have just explained.

Turning now to the actual coverage afforded by the travel policy in question. The policy states that:

“We will pay the insurance excess you are liable for under a hire agreement up to $3,000 under the [name withheld] Plan and up to $2,000 for all other plans.”

The way this is intended to operate is that the amount of excess paid by the Insured was US$698 which was the full amount of the damage, but limited to the amount of the damage. While this is below the US$1,000 capped amount for the excess as stated in the hire contract, the Insured is clearly entitled to this amount under their travel policy.

As an aside, I can advise that recently I had a case myself where a truck travelling in the opposite direction to me, lost part of their load which hit the hire car I was driving. The amount of the damage was $181 and the excess under the hire car contract was $3000.

I reported the incident to my corporate travel insurer through my broker, not knowing the cost of the damage and when I learnt it was only $181 I advised my Insurer of the amount and it was not my intention to claim as I did not feel the amount warranted me lodging a claim and I would prefer to retain my good claims record.

The insurer nonetheless, sent me a cheque for the full amount of the damage, i.e. $181 confirming that this was the excess contribution I was to pay and the policy provided full coverage for it and that making the claim would not effect premiums or their attitude to me moving forward. [I am not sure that the claims officer concerned knew me personally and I would like to think that this was what they would do for anyone].

Turning back to the relevant wording, I believe that the Policy has been misinterpreted and your Insured is entitled to recover the US$698 charged to them under the terms of their travel insurance policy.

Should you or the insurer wish to discuss this with me further please do not hesitate to contact me.

Regards

Allan

 

What I would add as part of this post is that when I was trained as a claims officer and later as a loss adjuster, we were to look to pay valid claims and to look at what the intention of the cover was and what would a reasonable client expect their policy to respond to. The reason a person purchases excess buy down cover is to take away completely is to reduce the excess to zero. From the Insurers point of view, they should be happy the claim was limited to $698US and not the full $1,000 that it could have been, had the accident been more severe. More and more I get claim denials referred to me like this which with respect are no brainers and should really just be paid.

What damage does this sort of thing do to the relationship between the broker and the insurer, the Insured and the broker and just as importantly the insured’s view of the insurer and the brand insurance. Put on top of this all the time wasted to get the matter resolved and there is no guarantee that the opinion will over turn the decision in the first instance and it may have to go to Internal Disputes and then the Financial Ombudsmen Service.

For some time now, I have believed that additional training is required to avoid this sort of thing happening in the future.

I know who I would rather insure with and am glad that my broker put me with Chubb for our corporate travel.

One response to “Travel Policy Excess”

  1. Allan says:

    Great news is that the claim has now been paid in full. See follow up post on September 7

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