Following an ASIC review, credit card issuers and insurers have made improvements to disclosure for travel insurance provided through credit cards.
ASIC’s review of 17 credit card brands, issued by a range of credit card issuers, including the big four Australian banks, followed complaints made to ASIC from the general public and disputes data published by the Financial Ombudsman Service (FOS). These complaints included uncertainty around who was covered by the policy, the extent of exclusions and eligibility requirements.
Following the review, the credit card issuers and their insurers have agreed to make the following improvements:
- clarify when the insurance cover is ‘activated,’ particularly where a minimum spend threshold needs to be met to activate the insurance cover
- clarify if and when the use of reward points to pay for travel costs will activate the insurance cover
- clarify whether supplementary cardholders can benefit from the policy
- provide clearer and more prominent information about the documentation needed to make a claim.
Credit card issuers have also made improvements to their websites by making it easier to locate the insurance policy terms and conditions, and are now including direct links to the terms and conditions where none were provided previously.
Credit card issuers that also distribute standalone travel insurance have also made changes to their websites to clearly distinguish the standalone travel insurance policy from the credit card policy so that consumers do not mistakenly rely on the wrong policy.
ASIC’s Deputy Chairman Peter Kell, said, ‘As travel insurance may not be at the forefront of the consumer’s mind when obtaining a credit card, improved disclosure will help consumers understand and claim.’
‘Having travel insurance is essential for those heading on an overseas trip, to provide cover for when things go wrong. Credit card issuers and insurers must clearly set out what is and what is not covered by a policy, so that consumers can work out if they are adequately covered.’
Background
The credit card brands reviewed by ASIC included the big four Australian banks, as well as smaller Authorised Deposit-taking Institutions (ADI), and other non-ADI credit card providers. Insurance was provided to the credit card issuers by three major insurers.
Credit card travel insurance is insurance that is available to credit card holders, usually with ‘premium’ credit cards that offer extra benefits with the credit card. It is often described as ‘complimentary’ travel insurance as it is offered as a feature of the credit card with no additional fee, although credit cards that provide ‘complimentary’ travel insurance typically have an annual card fee (ranging from $87 to over $500 per year).
ASIC’s review did not include standalone travel insurance. Standalone and credit card travel insurance can differ, so consumers should consider which product is suitable for their travel needs so that they are adequately covered. Consumers with specific needs (such as pre-existing medical conditions) are especially encouraged to review their insurance coverage.
Standalone travel insurance generally requires the consumer to apply for and pay a premium. Credit card travel insurance requires a minimum spend on the credit card for the cover to be activated. Of the policies reviewed, more than half required the full airfare for travel to be paid on the credit card, while less than half of the policies required a minimum spend of between $250 and $1,000 of prepaid travel costs on the card (such as travel ticket or accommodation costs).
