Mira was travelling through India as part of a world trip, when the airline she had booked tickets on suffered a complete financial failure, cancelling all flights and leaving Mira stranded in Mumbai.
Mira contacted her insurer for advice, saying that the airline had a worldwide problem and had suspended all flights, but that her travel agent said the airline would refund the cost of her tickets. Mira did not say, possibly because she did not know, that the airline had suffered a complete financial collapse and would not be reimbursing her for the tickets.
The travel insurer told Mira she should book and pay for new tickets, then submit an insurance claim that would be assessed against the policy’s terms and conditions. Mira bought onward tickets at a vastly inflated price using her credit card to pay for them, believing the insurer would refund her in due course.
Mira lodged a claim, but the travel insurer declined to reimburse the cost of the tickets because the policy excluded cover where the loss is directly or indirectly caused by the financial default of an airline.
Mira said this was not fair, the insurer had given her the impression the claim would be covered, and referred the complaint to FSCL.
Dispute
Mira said the insurer told her to buy replacement tickets and that it would cover the cost. If she had known about the exclusion she would have waited in Mumbai until a cheaper ticket became available. Mira went on to say this was a concerning exclusion and could catch out many travellers.
The insurer did not accept it had misled Mira. The advice to purchase onward tickets was qualified by the claim being subject to the policy’s terms and conditions.
Review
There was no dispute that the insurer was entitled to decline the claim because the policy clearly excluded cover for loss caused directly or indirectly as a result of the financial default of an airline.
We listened to Mira’s telephone conversation with the insurer and were satisfied that although the insurer did not mention the exclusion, there was no reason for it to do so. Mira did not say that the airline had collapsed financially. Mira said that flights had been suspended and that her travel agent had advised she would get her money back from the airline. The insurer did warn Mira that her claim would be assessed against the policy wording.
We also noted that Mira could not stay in Mumbai indefinitely, and that air tickets purchased at short notice are inevitably expensive. Mira was at the beginning of her travel and we considered it most likely that, irrespective of the insurer’s advice, she would have purchased replacement tickets.
Resolution
We recommended that Mira discontinue her complaint. Mira was disappointed with this outcome, concerned that other people could find themselves unexpectedly stranded overseas without access to funds to buy replacement tickets.
Insights for consumers
Insurance is all about risk. In return for the premium you pay your insurer, the insurer agrees to accept the risk that an event occurs causing you loss. The extent of the risk the insurer is prepared to take is set out in the insurance policy. In this case, the insurer was not prepared to take the risk of loss resulting from the financial default of an airline. While this could mean that consumers are left stranded overseas, this does not mean that the insurer is obliged to cover the cost.
