Travel insurance alcohol exclusions rapped by Ombudsman
The Financial Ombudsman Service (FOS) has criticised the travel insurance industry for not being clear enough about alcohol exclusions.
In its latest report, published today, the FOS revealed it upheld 53% of travel insurance cases in 2013, up from 42% in 2011, with many cases involving customers who had their insurer refuse to pay out because they had drunk alcohol before the accident took place.
The majority of travel insurance polices exclude cover after excessive alcohol consumption, but the FOS found in some cases the terms about drinking were ill-defined, making it unclear for consumers just what they were covered for.
It had even seen some cases where customers were accused of "alcohol abuse" or "alcoholism" by their insurer, even though the medical evidence showed they only had one or two drinks.
In one example where the FOS upheld the complaint, a customer who was on holiday in Sydney fell down some stairs at a bar, causing him to break his leg and suffer a severe head injury. His claim was rejected by his insurer, who said they had evidence from the bar manager that he had bought numerous, beers, shots and glasses of wine.
But after the FOS investigated, it was found the bar manger said he had only bought a number of drinks – there was no mention of how much the man personally drunk – while neither "alcoholism" or "alcohol abuse" were defined in his policy documents.
"Each year we see the same issues crop up time and again within travel insurance complaints," the FOS said.
"It is up to the insurer to show that an exclusion applies, not for their customer to show that it doesn't. We expect a high standard of proof from insurers – proof that is consistent with other evidence."
In its report, the FOS also highlighted problems people have with car insurance after their car has been stolen.
Aside from PPI, the FOS sees more complaints about car and motorcycle insurance than any other type of insurance, with the Ombudsman finding about 40% of the cases it sees were wrongly rejected.
The majority of motor insurance polices exclude cover for theft if the key was left in a vehicle, or if the vehicle was left unlocked or unattended, but in many cases the definition of unattended is called into question.
The FOS said it may decide that the owner of a vehicle was in attendance, even if they weren't in the car, if they were close enough that their presence would be likely to deter a thief.
It can also be difficult to prove that an owner has been "reckless" in leaving their car and didn't take sufficient steps to protect it, the FOS said, and even in cases where it can be showed that an owner was "careless" this doesn't mean that cover should be excluded.
"We might say it isn't reasonable to apply an exclusion in exceptional circumstances – for example, an emergency – where leaving their car unattended isn't the driver's most pressing concern," the report adds.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Exclusion is a potential loss or specific risk that an insurance policy does not cover and they occur in all types of insurance policies. Common exclusions include: natural hazards (exploding volcanoes, earthquakes) war, nuclear fallout, wear and tear (anticipated through the use of a product, especially motor insurance), UFO damage to vehicles, vehicles “stolen” by vengeful spouses, travelling any pre-existing health problems and travelling to countries the Foreign & Commonwealth Office deems too dangerous.