Travel insurance products could attract criticism that they are little more than “junk insurance” if vague exclusions are used to decline claims from events such as the coronavirus outbreak, barristers at Edmund Barton Chambers say.

Jessica Tat and Elizabeth Esber say in a paper that challenges presented to medical experts by the COVID-19 virus, its ease of transition and increased international travel could mark a watershed moment for travel insurance.

The issues also come after the Hayne royal commission put the focus on financial products responding fairly to consumer expectations and community standards.

“While travel insurance claims may generally be of lesser monetary value compared to other types of personal insurance and potentially viewed as a ‘luxury’ or ‘lifestyle’ product, deficiencies in the policy wording or unfair interpretation of exclusion clauses can have a real impact on a large number of people,” the paper says.

Generally, injury or illness, loss or damage arising from pandemics are excluded, but phrasings may be vague or give minimal, if any, indication as to when or how exclusions come into effect.

Policies that do not have an actual pandemic exclusion may have other terms and conditions that are equally vague and would pose similar issues at claim time.

Short-term solutions the barristers suggest include a response strategy that makes trigger points clearer for exclusions, such as travel warnings or an outbreak in the country. Clarity should extend to other situations, including how policies should react for travel in countries not the subject of any warning.

Excluding the majority of claims under the proper application of exclusion wordings may still raise questions when it comes to community standards and expectations.

But the impact of ex-gratia payments also needs to be considered, particularly from a reinsurance perspective and the precedent set, the paper says.

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