Insurers under pressure to refund ‘worthless’ policies during pandemic

Pressure is mounting on reluctant insurers to refund customers for worthless policies, as travel cover has become unnecessary under the no-travel lockdown restrictions.

Confidence in insurers has eroded after many companies denied liability for paying claims on cancelled holidays, or shirked responsibility by taking refuge in the grey areas of the fine print. Added to this, anyone still holding a policy throughout the pandemic is effectively paying for a safety net that no longer has any use.

The Government advised against all but necessary travel on March 17, ruling out all holidays at home or abroad more than two months ago.

This means that travel insurers are still collecting or keeping payments for policies that have no value to customers. They will also be subjected to fewer or no new claims in the coming months as there will be virtually no holidays booked from March onwards.

Insurers sold 12 million policies in 2018, worth a total of £463m, according to the Association of British Insurers, a trade body.

A spokesman said there was no hard and fast rule about offering partial refunds, as it was a “commercial decision” and up to each insurer to choose how they would act.

He said: “Insurers do understand that some people will have bought policies they no longer require due to restrictions in light of Covid-19, so people should speak to their insurer if they have bought a policy that is no longer required.”

Nick Rowe, 77, a Telegraph Money reader from London, said he contacted his travel insurer, Avanti, to ask it to pause his policy during the lockdown, but was refused. Instead, Avanti offered to add three months to the end of his next annual policy as long as he renewed before the end of May.

The price of the new policy was 75pc higher than the one he had purchased in September, rising from £654 to £1,152.The reason given for raising the price by so much was that he was “one year older”, he said.

“People can’t travel – either because they are locked down or borders are closed – and Avanti is taking the opportunity to escalate its prices for policies that have minimal or no risk to them. It’s outrageous,” he said.

Avanti failed to reply to requests for comment.

Brian Brown, of ratings service Defaqto, said he knew of no insurers offering refunds for redundant travel insurance, despite many customers asking for some of their money back. People who pay for a packaged bank account for the travel insurance add-on will also miss out, he added.

“I would expect those banks to offer a reduced monthly fee – but again we haven’t seen any bank doing this,” he said.

James Daley, of the campaign group Fairer Finance, said: “It’s hard to see how firms can justify not providing any refund at all in these circumstances – particularly if you’ve not taken any trips at all since you bought your policy.”

The Financial Conduct Authority, the City regulator, has published guidance for insurers, advising them to allow cancellations without the usual fee.

This means you may be able to get a partial refund from your insurer at no extra cost if you ask for it.

Some of the largest travel insurers – including Axa, Aviva and LV – will issue a refund for remaining months on an annual policy at the request of a customer, but this will not be backdated to the start of lockdown.

Refunds are typically not available for customers who have made a claim in recent months. However, this agreement would leave people without cover for the rest of the year should the travel ban be lifted by the Government in the coming months.

Insurers will not typically allow customers to pause their policy.

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