FCA Warns Insurers Over 'Unreasonable' Travel Cancellations

By Martin Croucher
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Law360, London (October 5, 2020, 3:05 PM BST) -- Insurers should not make policyholders go to "unreasonable lengths" when they make a travel insurance claim, the Financial Conduct Authority has said in temporary guidance introduced in the wake of the COVID-19 pandemic.

The FCA said on Friday that it was not right that insurers expect customers who have had holidays canceled to initiate legal proceedings against tour operators or hotels before they can claim on their insurance policies.

The finalized guidance for the sector, which followed a consultation on July 31, lays out the regulator's expectations on how insurers should handle travel claims during the pandemic. It will apply until April 2021.

"Any potential claim on an insurance policy will depend on the terms of the policy," the regulator said. "Where an insurance provider requires policyholders to demonstrate or take reasonable steps to mitigate a financial loss under the terms of the policy, consumers should not have to go to unreasonable lengths to do this."

The FCA said that, in the case of a consumer who has contacted his or her tour operator to seek a refund, it would be enough to show an insurer an email history. It would suffice for a customer to show his insurers that he had made "several unsuccessful attempts" to get his money back.

"We would generally view it as unreasonable to expect that a consumer would need to go to court to recover their money," the FCA added.

The Association of British Insurers said in April that insurers would probably pay out £275 million ($357 million) in travel claims as a result of global disruption. The pandemic prompted nearly half of insurers to suspend all sales of travel cover to new customers. Other insurers continued selling products, but with exclusions for COVID-19.

Since then, many insurers have started to offer new products with protection against flight cancellations caused by a positive COVID-19 diagnosis.

Allianz Partners launched a revamped travel policy in July, which it said would offer cover at a "slightly higher premium" but would offer greater peace of mind. But the product does not offer protection if a traveler visits a country against Foreign Office advice on overseas destinations.

--Editing by Ed Harris

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