Travel insurers must start giving us refunds for policies we will never be able to use

With summer holidays being cancelled and overseas travel looking increasingly unlikely for most of us in 2020, you might be one of the many people who have thought about cancelling their travel insurance.

Unfortunately, unlike in almost all other parts of the general insurance market, most travel insurers don’t offer refunds when you cancel.

Once you’ve passed the cooling off period, your money is committed – even if you break your back three weeks after buying your policy and are told by your doctor that you face a year of bed rest.

It’s a problem our researchers stumbled on shortly after Fairer Finance got going six years ago. And as a result we keep an eye on how clearly insurers state their cancellation terms when customers take out their policies.

Of the 68 travel insurers whose purchase journeys we assess every six months, only seven make the cancellation terms crystal clear – a fact that may become important as firms begin to tussle with their customers about this issue over the coming months.

Travel insurance can be a very low-ticket product. If you’re young and healthy and buying cover for a week away in Europe, the cost will be no more than a few pounds. In these circumstances there’s not really a need to offer a refund once the policy has been paid for.

Even if firms did, they would be within their rights to charge an administration fee, and this would almost certainly be more than the premium.

But annual policies can be quite expensive – particularly if you’ve gone for comprehensive cover. A quick search on shows that for a family of four with no medical conditions, you could pay up to £350 for an annual worldwide travel insurance policy.

And if you have any kind of serious medical condition, it’s not difficult to get into four figures.

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.

As things stand, this isn’t against the rules and customers are calling up in their droves, often waiting on hold for more than an hour, to get the bad news. Often the best-case scenario is a promise by insurers to extend the cover for a few months.

But given that we’re likely to be living with coronavirus for a very long time, that’s a fairly worthless commitment for a large number of customers. Many of those who have pre-existing conditions, or who are elderly, are coming to terms with the fact that it may not be prudent for them to travel overseas for quite some time.

But even if these draconian cancellation terms aren’t illegal, the principles of regulation do put a clear obligation on firms to explain their products clearly – particularly any terms that are onerous.

Our research shows that only seven of the 68 biggest travel insurance brands clearly disclose the cancellation terms in the purchase journey. Of the remaining 61, 11 don’t mention these terms anywhere except in their 20,000-word policy documents.

The remaining 50 do a little better by putting it in their summary document – but we know that very few people read these.

For anyone who can’t get the refund they’re after, it’s worth making a formal complaint and taking it on to the ombudsman if that doesn’t work. There’s no guarantee that the ombudsman will turn things around for you. But, if your insurer didn’t make the cancellation terms clear to you, you may have a decent chance.

The City regulator needs to take another look at this issue – and ban insurers from being able to keep all premiums after the cooling-off period.

James Daley is managing director of the consumer group Fairer Finance 

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