Are insurers treating customers fairly?

Johanna Gornitzki's picture

Thousands of British holidaymakers’ travel plans were plunged into chaos in the middle of April after a cloud of ash from a volcanic eruption in Iceland shut down all UK airports, as well as many airports on mainland Europe.

To add insult to injury, many travellers discovered their insurance policies wouldn’t pay out any 
compensation, with insurers claiming the eruption and its aftermath was an ‘act of God’ and therefore excluded from their policies.

This is not the first time insurers have used this clause to get out of paying out for claims for 
natural disasters and other unexpected events. The terrorist attack in Bali in 2002, for example, saw some insurers paying out and others not (many insurers withdrew their terrorist cover post-September 11 and it's only in the past three years that insurers have added some terrorist cover to their policies).

Defending the stance of travel insurers, Nick Starling, director of general insurance and health at the 
Association of British Insurers, said: “While a volcanic eruption is not a specific insured event covered in insurance policies, some  cover for delay and travel abandonment may be a available.”

He added: “It’s an urban myth that insurers are relying on an ‘act of God’ clause to get out of providing cover for this event. Although this event may not be 
specifically covered by your insurer, some are offering ex-gratia [voluntary] payments for those customers stranded abroad.” 

However, all of us take out insurance for one reason only: to cover us for the unexpected. So when insurance policies fail to pay out, what kind of message is the insurance industry 
sending to its customers?

It’s certainly not: “We will cover you for the unexpected”. In fact, it’s more like: “We will cover you as long as it doesn’t work out to be too expensive”. 

If the event falls into the latter category, you’d better be prepared to stump up the cash yourself.

Sure, insurers have to look at their profit margins, but if they want consumers to continue buying into their mantra that insurance is 
vital, it’s time they stopped using their small print as a cop-out and started helping their customers when they need it the most.

Do you think insurers are treating their customers fairly? Share your views below.

Your Comments

 It is a sticky situation. If insurers stick to their policy terms then it is not covered but the ones that come out looking whiter than white saying they will cover you anyway are the insurers that are really going to gain from this. 

Providing that level of service is such a differentiator and will stick in individuals minds in the future when considering travel insurance.

I think insurance is fast becoming another method for ripping people off.
The problem with the ash has proved that insurance isnt really a requirement. Many people have been told that their policies will not pay out and as a result have had to pay for longer stays using savings or taking loans. In the future, if people make allowances for longer stays, ie, if going away for a week, save up as if going for three weeks. If travelling in Europe you can get medical cover from the post office.
So perhaps if people spend a little longer planning and preparing their holidays, the insurance companies may get a taste of their own medicine and stop ripping us off.

I do have a question. If this problem is classed as a natural disaster, why are the airlines complaining about the loss of earnings (profit for fat cats) and expecting the government to bail them out at the tax payers expence, while at the same time turning their backs on the the people left stranded? As it is a natural disaster, they should bite the bullet like everyone else, or go to their insurance company!!

Insurance companies get away with the 'proverbial murder'.  They write so many exclusions into their policies one wonders whether it is worth having insurance at all.  They say they make certain assumptions about what they are insuring for.   The public makes certain assumptions too about what insurance covers but that does not seem to matter.  It's a BIG rip-off. 

SAGA's Catch 22 on Volcanic Ash. I was delayed abroad and although I had it in writing from SAGA that compensation for delays would be payed: if I checked in or had a letter from the airline. On my return to the UK they would not even give me a claim form to make that claim. And in additiion they now said a claim could only be made if I had checked in at the airport.

But on the day of my flight, no one could check in and I was told not to go to the airport by the airline. Had I gone, then no doubt that would have invalidated other parts of my insurance, as I had gone to an unsafe area against the strict instructions of the airline.

So SAGA is going to save a packet. Good that catch 22.

It is funny that volcano eruption was included to the ‘acts of God’ . I think any natural disaster can be included into this list. Though Iceland volcano eruption was very impressive and religious people might really have thought that it was the God's punishment. Check this video to see how the eruption looked like . The volcanic plume has reached a height of 6-9 km. Unbelievable!

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