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Travellers are being warned about the limits of travel insurance coverage for cancelled flights – including those affected by jet fuel shortages – after a Kiwi family’s claim to recover the fare difference from their new booking was dismissed.
The global aviation industry has been upturned in the months followingthe US-Israeli war against Iran, with the latter’s effective blockade over the Strait of Hormuz – where about 20% of the world’s oil transits through – sparking a major fuel crisis.
In response to skyrocketing jet fuel prices, airlines around the world – including Air New Zealand – have been forced to cancel flights and change routes to manage available fuel.
The Insurance and Financial Services Ombudsman (IFSO) Scheme recently investigated a complaint from a family, whose return flights to New Zealand from the United Kingdom were cancelled by an unnamed airline due to “operational requirements”.
The family were refunded for their original flights but had to purchase replacement ones with another carrier at a premium, leading them to make a travel insurance claim to recoup the difference.
The insurer declined the family’s claim, citing policy exclusions for cancellations made by the transport provider except in certain, explicitly outlined circumstances.
A Kiwi family’s bid to recover the extra cost of booking new flights was rejected by their insurer, prompting a warning from the Insurance and Financial Services ombudsman.
After looking into their complaint, the IFSO Scheme found the family’s travel insurance policy didn’t apply to the circumstances surrounding their flight cancellation.
The IFSO Scheme determined the insurer was within its rights to decline the claim and didn’t uphold the complaint, leaving the family to cover the fare difference themselves.
“Cover is usually limited to clearly defined situations such as severe weather, industrial action, or mechanical failure,” said Insurance and Financial Services ombudsman Karen Stevens.
“If those circumstances don’t apply, there may be no cover.”
She said airlines usually class flight cancellations – including those caused by fuel price increases – as “operational” decisions, adding that the term is commonly used across travel insurance policies.
“If your flight is cancelled, your airline will usually refund you or give credit for the cost of your original flights,” Stevens said.
Stevens urged travellers to check their travel insurance policy before filing a claim. Photo / 123rf
“However, if the only alternative flights available cost more, you may have to pay the difference yourself.
“We could start to see this situation happening more if airlines continue to reduce flight schedules and cancel routes in response to higher fuel costs.”
Before making a claim, Stevens recommended travellers carefully read the fine print of their policy, particularly the cancellation and delay sections, to determine whether their situation is covered.
“Travel insurance can be very valuable, but it’s important to have realistic expectations about what it covers.
“Understanding your policy before you travel can help avoid unpleasant surprises.”
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