Why household’s journey insurance coverage declare was denied after flight cancellation

The Financial Services Ombudsman Scheme is reminding Kiwis heading overseas to learn their journey insurance coverage coverage after a household’s declare was just lately denied after their flight was cancelled.

According to the scheme, a New Zealand household visiting the UK had been just lately caught off guard by a misunderstanding which is changing into extra frequent as a result of gas shortages within the wake of the US and Israel’s assaults on Iran and disruption to transport within the Strait of Hormuz.

The household, whose names have been withheld, had simply wrapped up their journey to the UK and had been about to return to New Zealand when their flight was cancelled as a result of “operational requirements”.

After the flight was cancelled, the household then bought alternative tickets with one other airline at a considerably increased price.

The authentic airline had refunded the price of the unique flights, which didn’t cowl the price of the brand new tickets.

The household then made a journey insurance coverage declare to cowl the distinction – which was denied. The insurer stated their coverage excluded cowl for transport supplier cancellations, besides in restricted circumstances equivalent to mechanical failure or strike.

The household then made a criticism by the scheme – which handles complaints about insurance coverage and monetary companies. After the scheme investigated, it discovered the insurer was entitled to say no the declare and didn’t uphold the criticism.

The household was then disregarded of pocket for the fare distinction between the unique and alternative flights.

Why it was denied – and will develop into extra common

Insurance and Financial Services Ombudsman Karen Stevens stated it’s frequent for journey insurance coverage insurance policies to exclude cancellations brought on by the airline’s operational selections.

“Cover is usually limited to clearly defined situations such as severe weather, industrial action, or mechanical failure. If those circumstances don’t apply, there may be no cover.”

Stevens stated travellers ought to be conscious flight cancellations as a result of gas worth will increase would often be classed as operational.

“If your flight is cancelled, your airline will usually refund you or give credit for the cost of your original flights. However, if the only alternative flights available cost more, you may have to pay the difference yourself,” she stated.

“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.”

What to do

Stevens really useful these reserving journey insurance coverage to learn the cancellation and delay sections of their coverage fastidiously and examine the rationale that their flight was cancelled in the event that they intend to say.

“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,” she added.

The Financial Services Ombudsman Scheme stated from July 1 2025, 17% of its disputes it has accepted has associated to journey insurance coverage.