ASIC REVIEW ON CREDIT CARD TRAVEL INSURANCE DISCLOSURE
ASIC has issued a release on its review of credit card travel insurance disclosure identifying
various concerns and the improvements adopted by the relevant credit card issuers and their
insurers to address these concerns.
Background to the Review
Credit card travel insurance is provided to holders of certain credit cards. This may be a
complimentary additional feature of the card, or be activated by an event – most commonly, a
minimum spend amount. This cover is different to standalone travel insurance, where a premium is
paid to take out insurance independent of a credit card policy.
ASIC and the Financial Ombudsman Service (FOS) received a number of complaints regarding the
clarity of disclosure in relation to travel insurance provided through credit cards. These included
uncertainty around who was covered by the policy, the extent of exclusions and eligibility
requirements.
ASIC performed a review of 17 credit card brands from various credit card issuers including the
four major Australian banks. Insurance was provided to these credit card issuers by three major
insurers. ASIC’s review did not include standalone travel insurance.
Outcome of ASIC’s review
According to ASIC, following the review, the relevant credit card issuers and their insurers have
agreed to make the following changes:
- provide clearer guidance on when insurance cover is ‘activated’. This most commonly
occurs when a minimum spend amount is reached, but often there are additional rules
around which spending is included – for example, it is often only spending specific to
travel, such as airfares or accommodation. ASIC noted that 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);
- 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; and
- provide clearer and more prominent information about the documentation needed to make
a claim.
ASIC noted that credit card issuers also made improvements to their websites to:
- make it easier to locate policy terms and conditions – e.g by including direct links to the
terms and conditions where none were provided previously; and
- clearly distinguish standalone travel insurance products from credit card travel insurance
(for those issuers than distribute both) so that consumers do not mistakenly rely on the
wrong policy.
ASIC states in its release that “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.” ASIC also refers to its MoneySmart
website which has helpful tips for consumers on credit card travel insurance.
Things to think about
Whilst the review focused on credit card travel insurance, the guidance is useful more generally for
those involved in the distribution of insurance. In summary:
- ASIC considers consumer understanding to be paramount, so that each consumer can
work out if they will be adequately covered when things go wrong;
- policies should clearly set out what is and is not covered, with crucial information being
prominent or easy to locate;
- it is important to clearly distinguish between similar products, so that consumers do not
mistakenly take out the wrong policy;
- disclosures should not only help consumers understand the policy but also understand
what is required of them if they wish to make a claim;
- beneficiaries of a policy should be clearly identified; and
- websites and other information distributed should make it easy for consumers to find the
information they need, including policy terms and conditions.
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