Covid-19 and travel insurance – not every case is the same

Over the past six months, FSCL has received an influx of complaints from consumers who have had their overseas travel plans disrupted or cancelled because of Covid-19, and whose travel insurance claims have been declined.

Some insurance policies clearly exclude cover for loss caused by a pandemic or epidemic, and these complaints are not usually upheld. Case study “Pandemic forecast – low chance of cover’’ is an example of someone whose policy contained a pandemic/epidemic exclusion.

Some policies do not have a pandemic or epidemic exclusion. However, in these cases the insurer may decline the claim based on other policy exclusions such as ‘government interference’ or ‘disinclination to travel’.

The government interference exclusion clause applies where a government action directly impacts an insured person’s plans. For example, where a government closes its country’s borders to travellers. In this case, an insurer would be entitled to decline a claim relating to disrupted or cancelled travel. Case study "Covid-19 travel troubles" is an example.

However, where government interference causes a business to make a commercial decision that affects a traveller’s plans, the government interference exclusion is not likely to apply. For example, if a government closes its borders, an airline might make a commercial decision not to fly a particular route because of a collapse in customer demand. In this case, it is not the government’s action that has forced a change of plan for the insured, but rather the airline’s action, as illustrated in case study "Covid-19 cross border chaos".

Neither is a disinclination to travel exclusion clause likely to apply where someone changes or cancels their travel plans due to concerns about Covid-19. This exclusion applies where, for example, someone has changed their mind about travelling due to personal circumstances such as a relationship breakdown or job loss. However, where the change or cancellation of travel plans is caused by concerns about Covid-19, the dominant underlying or ‘proximate’ cause is Covid-19, not a change of mind. The case study "Covid-19 cross border chaos" also provides an example of this situation.

As shown in the three case studies, every case depends on its particular facts and the particular policy. Anyone who thinks a travel insurance claim has been wrongly or unfairly declined should contact FSCL.