Credit card providers have agreed to provide customers with clearer information regarding when ‘complimentary’ travel insurance is activated and to what extent cover is provided.
Many credit card holders have access to ‘complimentary’ travel insurance. However, many of these do not know that they have the benefit of cover, how to activate it, how it works or how to claim. This often gives rise to a general distrust of the cover and the purchase of a separate standalone policy (which itself may result in dual insurance).
Nevertheless, as awareness of this ‘complimentary’ cover has increased in the community, disputes have also increased involving travellers who believed they were covered but later found out certain requirements were not met to bring the cover into force (such as paying for a certain percentage of the flight or trip via that credit card).
As part of ASIC’s ongoing focus on add-on insurance (as reported in previous blogs), and in light of the increasing disputes and complaints in relation to this cover, ASIC conducted a review of 17 credit card brands offering ‘complimentary’ insurance.
Possibly to avoid further regulatory action, the credit card issuers and their insurers have now agreed to clarify:
- when the insurance cover is ‘activated,’ particularly where a minimum spend threshold needs to be met to activate the insurance cover;
- if and when the use of reward points to pay for travel costs will activate the insurance cover; and
- whether supplementary cardholders can benefit from the policy.
The issuers and insurers have also agreed to provide clearer and more prominent information about the documentation needed to make a claim.
In response to the agreed changes, ASIC’s Deputy Chairman Peter Kell, said ‘As travel insurance may not be at the forefront of the consumer’s mind when obtaining a credit card, improved disclosure will help consumers understand and claim.’
Undoubtedly, ASIC will continue to monitor the disputes data published by the Financial Ombudsman Service (FOS) to see whether the credit card issuers’ agreed changes result in a material decline in disputes before the FOS. If the changes do not lead to a reduction in disputes, it is possible that ASIC will move to impose greater obligations on the issuers.