Uncovered: Insurance deals that can be a costly mistake
Published:17:01 EDT, 7 May 2016 |Updated:17:01 EDT, 7 May 2016
Millions of holidaymakers this summer will rely on travel insurance from their bank if anything goes wrong. But they could be making a big mistake. The Mail on Sunday explains why this cover is often limited and poor value for money.
Holidaymakers are expected to make more than 30million trips abroad this summer – but many will gamble with their financial security by relying on insurance that could let them down in their hour of need.
Experts say those relying on travel insurance offered as part of a ‘packaged’ bank account are most at risk. Costing between £5 and £25 a month, these accounts provide travel cover as well as mobile phone insurance and motor breakdown cover. But the cover is riddled with holes.
Disappointed: Laura Giuffrida (below) was due to go on a cruise to St Kilda, but it had to be cancelled
Packaged bank accounts have come in for much criticism in recent years because too few customers make use of the benefits they pay for – or are not eligible under the terms of the cover offered with the account.
Three years ago, banks were told by the City regulator to send warning letters to customers if they no longer qualified for insurance provided with their account.
But some leading insurance brokers believe these ‘eligibility statements’ are not effective.
In a recent case reported to The Mail on Sunday, a customer who believed he was covered by travel insurance linked to his bank account only realised after returning from holiday that he was uninsured. This is because he was deemed too old, exceeding the policy’s age limit.
Consumer group FairerFinance rates financial companies on trust and customer satisfaction. Boss James Daley says: ‘Age limits are a real problem with travel insurance offered as part of a bank account.
‘Insurers are under more pressure to make customers aware of such upper-age limits. But this wasn’t happening five years ago, which is why we’re now seeing a spike in complaints.’
Insurance troubles: Laura Giuffrida
Laura Giuffrida felt confident she would be covered by the ‘free’ travel insurance included with her bank account when her trip to St Kilda in the Outer Hebrides of Scotland was cut short.
Last year, Laura and her husband Jonathan travelled from their home in Twickenham, South-West London, to Oban – from where they were to take a cruise. But they were told the cruise was cancelled because of a mechanical fault.
The couple received a full refund from the cruise operator but costs for unused flights, travel home and an overnight stay in a hotel added up to an extra £600.
They tried to claim on their travel policy included with Nationwide Building Society’s FlexAccount but were rejected.
Although the insurance provides up to £5,000 for cancellation or curtailment, they were told it did not cover costs that are a result of an operator not fulfilling their journey.
But Laura and Jonathan’s two travelling companions received payouts for similar costs from their respective insurers.
Laura, who is recently retired, says: ‘At no time during this upsetting period did it occur to us that our cover would not be appropriate.
‘We have been loyal Nationwide customers for more than 30 years and felt confident we were in safe hands. But we were left disappointed.’
The Mail on Sunday asked Nationwide to look again at the case.
A spokeswoman says had Laura and Jonathan claimed under the ‘travel delay’ part of their policy they would have been successful.
This pays out up to £250 per person, minus the policy’s excess fee. But she says the couple did not provide enough information first time around, adding: ‘It is only when customers confirm in writing they can’t claim from the travel company that we assess if they can claim.’
Laura has been told she can now claim.
Dissatisfaction with packaged bank accounts is widespread. According to the Financial Ombudsman Service, these accounts are the second most complained about financial product – after payment protection insurance.
Ombudsman spokesman Martyn James says: ‘The biggest risk for people with packaged bank account travel insurance is a change of circumstance that might affect their policy.’ People who purchase standalone cover are
given the opportunity to renew every year – adjusting the cover for any changes in their health, for example.
Even if they are alerted that their cover will automatically renew, they are still able to search for a better policy.
But those with packaged account travel insurance, which rolls on from one year to the next, are unlikely to check whether the policy is still right for them.
James says: ‘We receive complaints from people who did not realise they had to disclose to their insurer changes in their health – with the result they got landed with medical bills when falling ill abroad.
‘When you take out normal travel insurance, you are asked questions beforehand to help the insurer assess your eligibility for cover.’
A high price
Not all travel insurance deals linked to current accounts are poor value for money.
But anyone embarking on an adventure holiday, coping with ongoing health issues – however minor – or in their 60s will need to upgrade their cover and pay extra.
Those not taking full advantage of everything offered as part of a packaged bank account are likely to be overpaying – with annual fees amounting to between £60 and £300. By way of contrast, the average annual travel insurance policy costs £32.
Leap in cost: Adventure holidays incur increased bills for upgraded cover
As part of an investigation into competition in banking, the Competition and Markets Authority said packaged accounts were the most profitable type of current account for banks ‘as they generally require a monthly fee that exceeds the cost of the benefits provided’.
It is due to report back later this month with solutions for improving competition.
James adds: ‘Travel insurance policies offered through packaged bank accounts range from the excellent to poor value for money.
‘Some deluxe policies cover families worldwide, individuals up to a ripe old age with few exclusions, and allow lots of time abroad. Others may only cover a single person for travel in Europe, end when you reach 65, or even limit the amount of time you can spend travelling before cover is withdrawn.’
How to buy
Few people spend enough time ensuring their travel insurance is fit for purpose.
Daley says: ‘You do need to be careful when buying travel insurance. We recommend at least £5 million of medical cover in the event of a serious incident abroad and ending up in intensive care.
‘Also, watch out for excesses, which can be high.’ The excess is the fee you pay before a claim is paid.
An insurance broker will search for a deal that best suits your needs – according to any medical conditions you have, age and level of cover required. Use the ‘find a broker’ service provided by the British Insurance Brokers’ Association.
This allows you to search for a professional according to insurance type and postcode. Visit biba.org.uk or call 0370 9501790.
Ambulancia: Medical costs have gone up in some countries, particularly Spain
TERRORISM : Insurers will not pay out for cancellation of a trip if a customer is worried about the threat of terrorism – unless the Government advises against travel to a particular country.
Travellers concerned by world threats should see the Foreign Office’s advice about travel at gov.uk/foreign-travel-advice before booking a holiday, rather than relying on travel insurance to cover a change of heart.
SETBACKS IN SPAIN:Medical costs have gone up in some countries, particularly Spain. Increasingly, tourists needing medical treatment are taken to expensive private hospitals that do not accept the European Health Insurance Card. These free cards give access to state healthcare in countries in the European Union – as well as Norway, Iceland, Liechtenstein and Switzerland – at the same cost as local residents. However ambulances taking tourists to hospitals bump up the cost for UK insurers, some of which have tried to move patients from private to state-run hospitals while they are mid-treatment. As a result, travellers are now likely to pay more for cover in Spain.
To obtain a health insurance card or if your card has passed its expiry date, visit nhs.uk/ehic.
ADVENTUROUS TRAVEL : Insurance will not cover every activity. Some cover hiking only up to a specific altitude or riding only a low-powered scooter. Anything more intrepid is likely to require a policy upgrade.
Category: Travel Insurance