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Know your rights when it comes to travel insurance

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I paid for a cruise online. Now I have been informed that the company running the ship has gone broke and my travel insurer won't pay my claim for money I have lost as a result. What are my options?

Get out your travel insurance policy and give it a good read. It may mean reading 50 - yes, that's right, 50 - pages to find the "we will not pay" clauses and tackle those.

How anyone buying a travel insurance policy should be expected to read 50 pages is beyond me, but insurers claim that it's necessary to have that many pages to fulfil all their regulatory obligations.

Unfortunately, you are obliged to go through all 50 pages before you buy the cover as the insurance company says that is the requirement and when you sign for the policy you agree you have read and understood all the conditions.

This particular policy says in big print upfront that it covers the insured in the event of insolvency of a service provider. Well and good.

That is, until you get to page 33, where in the fine print the policy explains that it won't cover insolvency if the booking is not made in Australia, or if a reasonable person knew that the travel service provider was insolvent at the time the insurance is taken out.

Where does this leave me?

The insurer claims that the consumer took a risk paying for the cruise upfront because he booked through an overseas travel bureau and transferred money into American dollars without the benefit of insurance cover. That means he knew he was taking a risk and did not insure for it until months later, when he probably knew that the cruise ship company was broke.

The policyholder says that he was told the ship was damaged, but another would be made available for a delayed cruise, and only later found out that this was not to be and that the company had indeed gone broke.

The policyholder says he did not know about the insolvency until after insurance had been taken out and that no reasonable person here should be expected to know that the European shipping company that owned the cruise ship had gone broke.

There had been no media reports in Australia about it and there was no notification of the insolvency until months later. You can argue it is unreasonable for you to know this sort of detail and, in any event, the policy did not say you need to do due diligence on the company's financials before you pay up.

The insurance company also says "booking in Australia" means booking through a local accredited travel agent or service provider, and that because I booked it myself online my booking is not considered as an Australian booking.

This is arrant nonsense. More people every day are booking overseas trips, trains and air fares, hotel accommodation and holiday packages on their computer, online, directly from their home in Australia.

The definition of "booked in Australia" therefore needs to be clarified, and the insurance company in this case has indicated that it acknowledges that the policy wording can be confusing and will make this definition clearer and more precise.

If any policy wording you read in future says you are covered only if you book through a local travel agent, watch out, because if you book from your home computer yourself, you are likely not to be covered in the event of service provider insolvency or other risks.

The insurer explained that companies operating in Australia are covered by regulations, including refund and money recovery procedures when service providers go broke, and that provides an added protection for both insurers and policyholders.

Where do I take my dispute next?

First take up your dispute with the insurer. State your case in writing. The insurer may refer the dispute to the underwriter, which could take another look at your claim and how this fits into the policy conditions.

If the company still won't pay, contact the Financial Ombudsman Service, which deals with disputes involving financial products in Australia - and that includes travel insurance policies bought here.

The Financial Ombudsman Service can be contacted on 1300 78 08 08 or www.fos.org.au and follow the prompts on how to register your complaint online.

Note:

The policyholder in this case did all these things and the insurer paid his claim for the money he lost. This occurred after the policyholder had contacted the ombudsman and the media.

This case shows that it is a good idea to take out an insurance policy as soon as you pay for any travel service in advance and to make sure that the policy covers you if you are booking the holiday without a travel agent's services. Read that policy carefully right through. You have a 14-day cooling off period if you don't like the conditions.

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