Is travel insurance free with your credit card better than Corporate Travel Insurance?

Is travel insurance free with your credit card better than Corporate Travel Insurance?

Most insurance brokers and travel insurers would immediately say, of course not! Corporate Travel is the Rolls Royce of travel insurance.

Well, free travel insurance with a credit card is better for one insurer when it comes to cancellation due to illness between the date of purchasing the tickets and the start of the travel.

In this case, the Insured had been with the same corporate travel insurer for years. He was a professional man who purchased his travel insurance through a broker. During the period of insurance he purchased tickets for he and his wife for a trip that was to take place 4 days into the following insurance year but well and truly during the currency of the corporate travel policy.

Due to his age, the Insurer elected to ramp up the premiums a fair bit and so the broker shopped around and recommended changing to another quality insurer. The Insured took the brokers advice.

Before the end of the period of insurance with the first insurer, the Insured learned the devastating news that his wife had contracted cancer and required immediate medical treatment. He naturally cancelled the trip and sought to recover the loss of deposits etc that he was not able to get refunds on. The policy wording states:

In this section it clearly provides coverage before the travel commences.

The Policy does not state that either the purchase date of the tickets and/or the travel has to occur during the Period of Insurance but I think it fair to say that it is implied that the trigger for the cancellation needs to be during the Period of Insurance. You could not for instance take out the Policy and then seek to claim for something that already occurred. That would be selecting against the insurer and against the principle of utmost good faith.

At the same time, I think it unfair that the insurer is denying the claim on the grounds that the trip was to take place 4 days after expiry of the policy.

What I try and do is put myself in the shoes of the Insured and the Insurer, here the Insured’s.

The Insured has paid premium for the entire period, that is before the trip and at the time of the purchase of the tickets and at the time the cancellation or change was triggered. They also had cover in place, albeit with a different insurer for the travel itself.

I wrote and asked the Insurer to put themselves in the position that they were the new insurer and they were asked to pay for something that had already occurred. I am sure they would deny this and push the claim back on the earlier insurer. This is only fair and what the new insurer, in my mind rightly did.

Had the trip been set to travel 4 days earlier the insurer state they would have paid.

In good conscience I feel that the claim ought to be met under the first policy, that is the one that was in force when the trigger arose. I believe that the wording of the policy is such that this is the intention of Section 5 and it is certainly not spelt out that it is not covered should the policy be cancelled or transferred prior to the travel date, particularly when say the client was to pass away and never travel.

Despite my best efforts the claim remains denied. There are two things that I believe is at play here. The first is that the representative of the insurer is of the opinion that had the insured renewed with them they would have paid the claim as the trip was purchased, the illness was diagnosed and the trip were all to take place during the contract of insurance.

As far back as 1993 in CE Heath Underwriting and Insurance (Australia) Pty Ltd v Edwards Dunlop and Co Ltd, [1993] HCA 21; 176 CLR 535, the High Court of Australia confirmed what we all ought to have known, and that is each renewal sparks a new and independent contract of insurance, even if the policy has the same policy number.

On this basis and on the precedent set in this claim, this insurer’s policy contains a serious flaw in the cover provided by the cancellation clause making it inferior in my eyes to that of most credit card travel policies when it comes to this section of coverage.

The second obstacle is that I was not involved in the claim until it was too late. The matter had been brought before FOS and to the amazement of the Insured, their broker and to me, FOS found in favour of the Insurer. Yet one of a string of cases where FOS appears to have failed to get it right. This of course emboldens the insurer, but in this case, the Insured is prepared to take it to court to try and get fair justice.

This type of behavior at a time when there is a new major travel insurer in the Australian market that is going out of their way to treat insured’s fairly, namely TravelCard, it is really only giving the new entrant a leg up. In fairness, I do not believe other quality corporate travel Insurers such as Chubb or Zurich would be treating this insured in this way.

I honestly do not believe that any other corporate travel insurer would take this approach to a claim under these circumstances, particularly when the Insured had been with them for so long with such a good claims history.

In a way, I wished this one was taken before the Royal Commission as I think the quality of the decisions from those charged with being a fair umpire needs to be examined. The fact that the ombudsmen service is now expanding its range of services scares me as insurance claims are often complex and if you do not understand the basic principles, what is expected of standard policies etc then wrong decisions are likely.

I stress, I would not be raising this last point if this was an isolated case. There are way too many wrong decisions that are causing those in the industry to shake their head in disbelief.

I have arranged for a warning to be placed on on this point for the insurer concerned so that others are not caught as was this insured.


2 responses to “Is travel insurance free with your credit card better than Corporate Travel Insurance?”

  1. I agree this claim should be paid. If they have been with the same insurer for years, they were probably intending to renew the cover anyway weren’t they? Did the Insurer give notice that they were not going to offer renewal instead?
    I would keep fighting them on this one because it is grossly unfair. I do recognise the company and the clause and we have a number of Corporate Travel policies with them, so their response to this is extremely disappointing as generally they have been very good on claims. Especially when you consider the tragedy surrounding the cancelled trip.
    Perhaps the Royal Commission would to hear about this one?

  2. Janette says:

    This claim reminded me of this article, I personally find Peter Kell from ASIC is a fabulous wordsmith who appears to have a fair and reasonable attitude i.e. as per the below article quoting him: “Fairness has been sacrificed at the altar of technicality”

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