Consumer Watch: Travel insurance unlikely to cover coronavirus
Still planning to take that trip abroad? If so, your travel insurer is probably not going to entertain any coronavirus-related claims because it’s been classified as a “known event”.
Thursday’s announcement that a KwaZulu-Natal man, who had arrived back in the country from Italy, had tested positive for the Covid-19 virus has changed the game for South African citizens as well as travellers.
Earlier in the week, insurers said they viewed the coronavirus or Covid-19 as no special risk, so travellers who contract the virus would be covered, with support in foreign countries, as well as ticket cancellations and medical expenses.
But industry insiders say the virus is now a known threat so travel insurers are unlikely to pay out claims for bookings made after specific dates.
Last month, Hollard Travel announced that its insurance policyholders were covered for medical expenses if they contracted the coronavirus, or if they were forced to cancel their travel plans due to the outbreak.
The situation remains fluid though, and with Covid-19 reaching our shores, other travel insurers are no longer offering cover for the virus.
Travel insurance is designed for “unforeseen events”, which the coronavirus no longer is.
Airlines are cancelling flights, entire cities have been quarantined, major events have been cancelled and many companies have instructed their staff to limit non-essential travel.
Corporates have placed a moratorium on any international travel while others have told their staff to work from home.
International travellers are likely to experience severe restrictions on their journeys too, with some countries placing travellers under two-week quarantine and limiting movement within their countries.
Some experts are advising against travel altogether in the near future.
Christelle Colman, an insurance expert at Old Mutual Insure, says Covid-19 announcements about the virus’s spread, including updates from official bodies such as the Centers for Disease Control in the US, the World Health Organization and social media, meant that Covid-19 could no longer be classified as unforeseen.
Consumers, Colman says, need to check whether their travel cover included cancellation or curtailment caused by Covid-19.
“Given the global media hype and numerous official statements concerning the virus, most travel policies will no longer cover cancellation or curtailment resulting from Covid-19. Most medical travel policies are likely to continue to cover policy holders even in cases of Covid-19 infection while abroad, many may not - especially if the situation reaches global epidemic proportions.”
Colman says the outbreak demonstrated that in an age of global interdependence and connectivity, insurance was a mindset requiring individuals to manage their own risk exposure.
“Gone are the days of just buying any old travel cover and hopping on a plane,” says Colman, advising that consumers should rethink their plans and if they couldn’t, to limit their risk and know what they are covered for.
“Ask your provider what your travel policy will cover, what assistance they have on the ground, and what their procedure is in cases of Covid-19 cancellation, infection and treatment,” she says.
“Avoiding and managing risk through research, interrogation, caution and responsible decision making and self-management is as important as tailoring cover to meet specific risks that reputable insurances providers can actually deliver - anywhere in the world.”
But with travel insurers unlikely to cover claims for cancellations of bookings purchased after a specific date, travellers will probably be severely out of pocket, with little recourse available to them, barring “cancel for any reason” insurance.
“Cancel for any reason” coverage usually has to be bought within 21 days after payment for a trip, which can cost about 40% more than standard travel insurance. However, it reimburses travellers up to 75% of the cost of their trip.
Nadia Smith, a commercial and finance law specialist at Caveat Legal, said travel companies were notifying their partners that their force majeure policies (clauses which deal with unforeseeable circumstances, such as war, strikes, riot, crime, or act of God that prevent either party from fulfilling a contract) had been extended to all travellers from mainland China and properties within China.
As a result, she said, deposits received by hotels and guest houses would have to be repaid, regardless of the establishments’ cancellation policies.
“Businesses in South Africa should be aware of this and consider whether the outbreak may affect their commercial contracts and if so, which steps they can take to minimise their risk and exposure, both in the short-term and the long-term,” she says.
For consumers with plans to travel elsewhere, it’s all down to the contract.
“If they want to cancel their flights or accommodation, they will need to put on their reading glasses and read the fine print of the contracts very carefully before they approach the suppliers,” Smith says.
Starting with the definition of a known event and when it is classified, some contracts might define the known event as having started on January 30, with the WHO’s declaration of the coronavirus as a “global health emergency”, while others might define it as once it had reached South African shores.
Cancellation rights, as per the Consumer Protection Act, would depend on how your tickets were bought, when and where. Smith says if travellers decided to cancel due to fear, they needed to look at their exposure contractually. If you booked in response to direct marketing, there’s a five-day cool-off period. But most people booked flights and accommodation directly. “If you read the fine print, they might stipulate a sliding scale for refunds. If the airline cancels, it would have to refund 100% of the ticket price. If it qualifies as a force majeure, as per the company’s own definition, they have to refund customers.”
Travel insurance can vary and it might not be too late to upgrade to a more comprehensive plan. In areas affected by the outbreak, airlines are waiving ticket change fees as well as fare price differences, but you need to act quickly to qualify for it.
* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.
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