Australian travel insurance red flags: missed connections, stolen luggage and preexisting conditions | Australia holidays

“Concerning” survey results from the Australian government website Smarttraveller this month show one in six Australians travelled without any insurance on their last overseas trip. Even those who had insurance may not have been sufficiently covered, as over 80% of travellers did not properly read their policy product disclosure statement (PDS), an essential step for understanding what is and is not covered.

In a statement, the Insurance Council of Australia’s CEO, Andrew Hall, said these results mean “Australians are putting themselves at risk,” and that “personal responsibility plays a big part in your travel plans and it’s important to read the details of your policy, so you know you are covered”.

But insurers do not always make it easy for consumers to understand their coverage. There are frequently differences between the top line payout numbers in travel insurance sales documents and the exceptions, exclusions, caps and other icebergs submerged in the fine print of a PDS.

The Australian Securities and Investments Commission (Asic) identified exactly this issue last year, when Allianz and AWP pleaded guilty to making false statements about travel insurance between 2016 and 2018.

So whether you’re buying a policy for your next trip, or already have one, it’s essential to read the PDS before you depart – no matter how many mind-numbing pages of legalese it contains.

Why the PDS matters

Calling and asking a potential insurer questions may not help. While reporting this story, Guardian Australia contacted several travel insurance company call centres to ask for clarification of payment guidelines. On multiple occasions call centre staff gave inaccurate responses that overstated likely payouts while also stating that any advice was general in nature and that only the PDS would be legally binding.

Consumer advocacy group Choice recommends specifically checking:

• A PDS’s table of benefits, which summarises your coverage.

• The policy cover section, which is split into “what we will pay for” and “what we won’t pay for”.

• General exclusions.

• Preexisting conditions.

• The word-definition table.

• The paperwork you need for claims

• The Covid-cover section, and;

• The 24-hour emergency assistance information.

Mind the connecting flight times

Two in five Australians had a flight delayed or cancelled in the last 12 months, so delays and missed connections are a likely scenario for most travellers.

If the flight cancellation or delay is caused by an airline, then you will have to look to that airline for any compensation. Generally, airlines will offer to rebook you on a later flight or give you credit. Travel insurance customers can only seek to lodge claims if the cancellation or delay was due to circumstances outside the airline’s control, such as bad weather or strikes.

But many airlines are not giving reasons for cancellations or delays. In these cases, you must provide details of your request to the airline and offer your insurer a reasonable explanation for why this information was not supplied – which may prove impossible or at least onerous.

Insurers also differ on how they cover airline delays not caused by airlines. Cover-More, for instance, does not cover missed connecting flights if the scheduled transit time is less than 90 minutes, even if the airline itself scheduled a tighter connection. World2Cover will only consider claims for flight delays longer than six hours.

If flight delays or cancellations prevent you from boarding a cruise, a pre-paid flight or multi-night tour, most travel insurance will cover additional transportation and accommodation costs to enable you to make your pre-booked connection or catch up with your itinerary – minus whatever the travel provider covers.

Be wary of stolen luggage exclusions (and minimise your risk)

Be sure to read the meaning of “unattended” in the word definitions in the PDS, specifically as it relates to luggage stolen from cars, stowed in the luggage area of a train or checked in at an airport. Different insurers also have varying item limits for laptops, cameras, smartphones and tablets.

Luggage stolen from cars is worth examining in detail if you’re taking a driving holiday. With most policies, luggage must be stolen from a locked boot or concealed storage compartment during daylight hours, there must be forced entry to the car and you must make a police report if you want any chance of getting a payout. So if a theft occurs from an unlocked car, the luggage was in full sight, or was left in a car overnight, you will not be covered.

There may be extra caps for luggage stolen from cars too. Cover-More, for instance, reduces its payment for stolen luggage to $2,000 per vehicle, minus the chosen excess. With all other payments for stolen luggage, their per person payment ranges from $5,000 to $25,000, depending on the level of cover chosen.

Travel insurance has a much lower loss ratio (payment of claims as a percentage of total premiums) than other insurance types like car or home contents. A review by the European Insurance and Occupational Pensions Authority found that for every €100 spent on travel insurance, total payments averaged only €14. The loss ratio for car or home insurance is generally 60-75%.

While this can partially be explained by higher administration costs, limited underwriting, and a thick band of commission-earning on-sellers (think Flight Centre, Qantas, and state car associations), caps and exclusions for the most likely worst-case-scenarios are also a factor.

Be careful with preexisting conditions

Generally speaking, it is best to declare your preexisting conditions when buying travel insurance, but know that this could increase your premiums or even hurt your ability to get insurance for those conditions at all. You may still be able to get coverage for lost luggage, delayed or cancelled flights and other mishaps.

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This is a complicated, confusing area not only for older travellers, who may have more medical conditions, but also for pregnant women. Insurance companies vary in the number of weeks allowed in their coverage for pregnant travellers. In general, assume that they are in the business of limiting pay-outs.

Basically any health issues you know about, or have ever been treated for, can count as a preexisting condition. These will not be covered by travel insurance unless you declare those conditions for evaluation or they appear on the list of dozens of preexisting conditions (which include high cholesterol, bunions, asthma, and type 1 and 2 diabetes) that most insurance companies cover under their general policies. However, beware of all the provisos and always read the PDS.

If, for instance, you do not declare that you have a heart stent and have a heart attack while travelling, you will not be covered.

Some travel insurance policies will not cover people over 80 years of age. Others charge higher premiums, higher excess and give restricted conditions to “older” travellers – which in some cases may be defined as young as 50.

Some travel insurance companies also adjust their pricing and coverage based on the traveller’s destination. For example, there is some hesitancy to cover people with some preexisting conditions if they are travelling to the United States, due to the exorbitant medical costs there, as well as to many countries with scant medical facilities.

Policies differ regarding mental illness too. According to Choice, many travel insurers won’t provide cover for hospitalisation, medication or missed travel caused by a mental health condition. Others will provide cover if you declare a mental illness as a preexisting condition and pay a higher premium. Insurers are unlikely to pay a mental health-related claim if it was undisclosed and preexisting.

If you have to delay or change plans due to an immediate family member’s illness, expect a similar rigmarole if their medical issues were caused by a preexisting condition. Be sure and check the definition of “immediate family member” as well.

See a doctor if you get Covid (and prepare to pay more)

Cover-More was the first Australian travel insurance company to offer Covid cover. Today, the company adds an extra $500 deductible for reimbursements made when a traveller contracts Covid-19.

World2Cover offers Covid cover only with their most expensive policy. It covers unlimited overseas medical and hospital costs, as well as $3,500 per adult for additional Covid-related expenses.

No insurance company will provide coverage if the country or countries you are travelling to are locked down because of Covid, nor will they pay for travel delays due to general pandemics of any kind.

In order to make a claim you will need to show proof of a Covid diagnosis, by a qualified medical practitioner; a positive Rat test will not be sufficient.

Once again, it all comes down to reading the insurance company’s PDS, asking loads of questions and keeping a detailed record of the answers you receive, in case you have to dispute a claim later on. Like all insurance, if you buy it, just hope you don’t have to use it.

Who are you going to call?

• Travel insurance offered through Cover-More is also distributed through Medibank, Commonwealth Bank, NRMA, Flight Centre and Travel Associates and is underwritten by the Zurich Insurance Group. They have call centres based in Australia and offshore.

• Travel insurance offered through World2Cover is also offered through the state car associations, except NRMA, and is underwritten by Tokio Marine & Nichido Fire Insurance Co. Their call centres are based in Australia.

• Travel insurance offered through Qantas is underwritten by AIG Australia. Qantas travel insurance call centres are based in Australia. AIG call centres are offshore.

• Travel insurance offered through Westpac, ANZ and NAB credit cards is underwritten by Allianz. The Allianz call centre is offshore.