Tane and Charlotte were travelling to Fiji for a six-day holiday. They had purchased travel insurance online at the same time as they booked their plane tickets. Unfortunately, the airline cancelled their flight and put them on a flight the following day, at no cost to Tane and Charlotte. However, Tane and Charlotte were unable to enjoy one night of accommodation that they had already paid for.
When Tane and Charlotte got back to New Zealand they lodged an insurance claim for the one night’s lost accommodation. Charlotte gave the insurer all the information it needed to assess the claim, including the original itinerary. Over the following three weeks the insurer asked Charlotte again for the itinerary five times and did not make the decision to decline the claim for over a month.
The insurer referred to a clause in the policy excluding cover for pre-paid accommodation lost as a result of rescheduling by an airline.
Tane and Charlotte were surprised by this decision, it seemed to them that this was exactly what insurance was designed to cover. Tane decided to call the insurer, posing a ‘hypothetical’ scenario, where an airline delayed a flight. The insurer, not knowing the policy Tane was referring to, said there would be cover.
Tane and Charlotte then complained to the insurer that the claim had been incorrectly declined. In the light of Tane’s telephone call, the insurer offered Tane and Charlotte $33.48, being the one night’s accommodation, less the $100 policy excess.
Tane and Charlotte did not accept the insurer’s offer and referred the complaint to us.
Tane and Charlotte said that the insurer should have accepted the claim from the beginning. It gave them the run around for over a month, asking for an itinerary that Charlotte had already provided. Tane and Charlotte considered a reasonable response would be to pay the full amount of the claim, $133.48, as an acknowledgement of the inconvenience caused.
The insurer declined to resolve the complaint on this basis, saying it had correctly declined the claim because it was not covered by the policy. The insurer considered Tane had been dishonest during his telephone call when he pretended to be interested in buying a policy and had only reluctantly offered the $33.48 to resolve the complaint.
We agreed that the insurer was entitled to decline the claim. Pre-paid accommodation lost as a result of an airline’s delay was clearly not covered by the policy wording. However, we considered the delay in assessing the claim, and the continual requests for an itinerary it already had and probably did not need, caused Tane and Charlotte considerable inconvenience. The insurer should have been able to decline the claim almost immediately.
We suggested that the insurer pay Tane and Charlotte $250 as compensation for inconvenience.
Both the insurer and Tane and Charlotte accepted the offer and the complaint was resolved on this basis.
Insights for participants
Under the Fair Insurance Code an insurer is obliged to make a decision on the claim within 10 days from the date it has all relevant information. This was a straightforward claim that should have been assessed and declined without delay. The unnecessary time taken, and continual requests for information, gave false hope and was inconvenient for Tane and Charlotte.