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Law360, London (May 17, 2021, 1:54 PM BST) -- Regulators and the government should set out guidelines clarifying which travel insurance policies provide cover for coronavirus-related issues and to what extent, a consumer group said on Monday.
People are being left with a false impression about how much protection they could get if their holiday plans are hit by the pandemic because terms on insurers' websites often confusing, consumer group Which? said. It pointed to such terms as "COVID cover" and "enhanced COVID cover."
Some insurers provide upfront details about how extensively their cover will protect against disruption linked to the coronavirus outbreak, the campaign group said. But others just state the main benefits of their enhanced COVID-19 cover and are less clear about what is excluded.
"Without closer scrutiny from government and regulators of how clearly insurers present their policies, there is a very real chance that many travelers will be left out of pocket yet again this summer," Jenny Ross, editor of Which? Money magazine, said.
Which? believes the problem is also due to poor communication by some travel insurance providers. The group surveyed more than 2,800 buyers of travel insurance between February and March about possible travel and insurance scenarios.
Half the respondents, 50%, thought they would be covered if the government's travel advice changed after they arranged their trip, Which? said. The group also said that 47% believed they would be covered by their insurance if government lockdowns prevented them from traveling.
Just under half, 46%, thought that — although they would not be offered a cash refund — they would still be covered if the airline or holiday businesses postponed their travel.
But Which? said that its analysis from October to November 2020 of 73 travel insurance providers found that cover for those three eventualities — particularly for when government travel advice changes — was "very rare, with large discrepancies between what policies included."
Which? added that it has continued to monitor the coronavirus cover and thinks little has improved in recent months.
The consumer campaigner wants the Financial Conduct Authority to monitor the terminology set out in the COVID-19 policies and marketing material of travel insurers, to ensure that there is sufficient clarity. It also wants the City watchdog to issue guidance on the use of blanket terms such as "COVID cover'" and "enhanced COVID cover."
Which? has also urged the Department for Transport to work jointly with the sector, HM Treasury and regulators such as the FCA, the Civil Aviation Authority and the Competition and Markets Authority to ensure that all travelers properly understand their insurance cover.
A spokesperson for the Association of British Insurers said policies bought after the pandemic was declared are unlikely to cover cancellations caused by the outbreak.
"We urge people to read their policy to understand the scope of cover, as policies bought after the pandemic was declared are unlikely to cover cancelation due to [COVID-19] as it is a known risk, and travel insurance is designed and priced to cover unforeseen events," the spokesperson said.
"Travelers should always be aware of and follow government advice, and the border requirements of the country they are visiting. And always follow [Foreign Office] advice to avoid invalidating your travel insurance."
A Treasury spokesperson said customers should check the terms and conditions of their policy, and that the government is working closely with the FCA to ensure that rules are being upheld.
"It is likely that any policy bought or renewed, or trip booked, after the pandemic was officially declared will not cover cancelation due to COVID-19 as it is a known risk," the spokesperson said. But the spokesperson noted that "FCA rules require insurers to handle claims fairly and promptly; provide reasonable guidance to help a policyholder make a claim; not reject a claim unreasonably; and settle claims promptly once settlement terms are agreed."
The Department for Transport pointed to its passenger COVID-19 charter, published on Monday, and which is aimed at providing clear information and guidance on rights about international travel when pandemic measures are in place.
The Competition and Markets Authority threatened travel booking service Lastminute.com with court action in February after it failed to refund customers for holidays that were canceled because of the virus crisis.
Following lockdowns introduced last year, insurers have offered policyholders affected by the pandemic some flexibility with their home and motor insurance policies. But they have since said that some support will be withdrawn as the country eases restrictions.
--Editing by Joe Millis.
Update: This story has been updated to include comments from HM Treasury and the Department for Transport.
For a reprint of this article, please contact reprints@law360.com.
