A woman cancelled an overseas holiday when her mother became ill and was shocked to discover she was not eligible for reimbursement. Photo: 123RF
Insurers can pay billions of claims each year, but many people are still disappointed, when they have a claim turned down or receive less than they expected.
Insurance and Financial Services Ombudsman Karen Stevens says her office is dealing with more complaints than ever before from people for whom the process has not gone as expected.
"For years and years, we would do around 3000 complaints a year and 300 investigations," she said. "By the end of this financial year, we'll be over 500 investigations - it's gone way up.
"Last year, we had just on 5000 complaints into the office."
She said part of the rise was due to increasing public awareness about what the scheme offered, but there were also misunderstandings about what insurance could be expected to provide.
"The biggest consumer issue that we've got most of the time is a lack of understanding on scope of cover. Because they pay their premiums, they think that they're covered for basically every contingency."
Here are some of the things that might seem small, but could affect your ability to make a claim.
Exclusions
Stevens said insurance policy exclusions were something that caught people out frequently.
Many policies include things that will not be covered and it's important to check what these are, so you know what to expect.
"One that immediately springs to mind that I was looking at last night was in a travel context, where a woman and her husband and family were going on holiday.
"They had travel insurance. She found out that her mother was very unwell and not likely to last the time that they were going to be away, so she cancelled her trip.
"The problem was that there was an exclusion in the policy that quite clearly said that they wouldn't have unlimited cover, if the person who was unwell had been in a rest home of any sort in the 12 months prior to becoming seriously unwell or dying."
That meant they had limited cover of up to $1000 per adult, which did not cover the costs of the trip.
"She said, 'Oh, but there was nothing wrong with her, until she got pneumonia in hospital'. Well, that's fine, but the policy had an exclusion that actually had nothing to do with her wellness or anything else at the time."
Modifications
Stevens said modifications made to cars could be a problem.
"If an insurer is unaware of the modifications, there's a specific exclusion, if they haven't been told about them and priced accordingly. They're likely to find out, when they go to claim, that not only are they not covered, but of course, our draconian laws on non-disclosure, which still stand, mean that they probably won't have any cover going forward either.
"You know, vehicle modifications are still a big one in New Zealand."
Consumer NZ insurance specialist Rebecca Styles said insurers could have a broad definition of what would count as modification.
Parking somewhere else
Styles said, if someone had been given lower premiums or a lower excess based on where a car would be parked, and then parked elsewhere, that could be a problem.
"The insurer will have the ability, under the policy, to say, 'Well, terribly sorry, but we're either not paying your claim, because you're in breach of a condition or will avoid the policy', again, depending on the policy wording."
Styles said State, for example, had a list of broad examples of when someone should notify it about a change to where a car was kept.
"Where you park your car is considered a 'risk factor', so that would be taken into account, when pricing your policy - you usually park in a garage, but moved house and now park on the street.
"While I haven't come across instances of an insurer declining a claim because of this, in the policy, there is a requirement to let the insurer know."
Missing payments
If you're paying your insurance on a monthly basis and miss some, you could find your policy is cancelled.
Styles pointed to a State policy that said people who missed a payment would get a notice and, if it remained unpaid, the policy could be cancelled.
Being an Uber driver
Insurers want to be notified before you start using your car for something like Uber or DeliverEasy, and some don't offer cover for these activities.
You didn't take enough care
Taking "reasonable care" is a standard requirement for most insurance policies.
That means, if you leave your car unlocked with the keys in it, you might not have cover if someone steals it.
This can be an issue in situations, such as where people leave their keys on the beach, while they go for a swim.
Stevens' office said many travel insurance policies also had a requirement that people not leave items unattended, even for very short periods of time.
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