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Unfair contract terms in insurance policies are costing us

CHOICE calls time on dodgy practices in the insurance industry.

Last updated: 10 October 2019

Need to know

  • Australians are regularly exploited by unfair contract terms in insurance policies, particularly when it comes to pet insurance and travel insurance
  • Clauses that insurers use to deny claims are often buried in lengthy, complicated policy contracts that are difficult to understand
  • CHOICE is calling on the federal government to close the loopholes that allows insurers to swindle Australians out of claiming on their policies 

Isabel, a pet owner from Queensland, is frustrated. She took out pet insurance for her dog William in 2016, but so far every claim she's made on her policy has been refused. 

"The latest issue was when my dog ate a bone which splintered and stuck in his bowel, requiring emergency surgery and a stay in the vet hospital overnight," says Isabel. 

"They said I am not covered. You would expect this type of scenario falls under an 'accidental injury' but according to them, an accidental injury is only if your dog gets hit by a car and has a broken bone." 

Isabel has tried to claim multiple times when her dog has needed emergency treatment or surgery, and was surprised to learn each time that her insurer would not pay up. 

"They use confusing terms and narrow definitions of words which have ordinary meaning (like "accident") to give the illusion of cover where there is none and to avoid taking any responsibility to pay any claim," she says. Isabel feels she's been misled into buying a useless insurance product. 

dog will ball in mouth

Pet insurance contracts are riddled with unfair terms you may not be aware of when you sign up.

CHOICE policy and campaigns adviser Patrick Veyret says that sadly, Isabel's situation is a common one. 

"Our insurance experts here at CHOICE analyse and review general insurance products and regularly find policies that have crazily unfair contract terms that are almost impossible for everyday Australians to understand," says Veyret.  

"This causes serious financial harm when people's insurance claims are denied due to the differences between what they thought was covered by their policy and what is actually covered." 

Many will not pay for treatment if your cat or dog gets certain illnesses for which a vaccine exists, even if they are vaccinated

CHOICE insurance expert Uta Mihm

CHOICE insurance expert Uta Mihm says terms that insurers use to deny claims are often buried in a lengthy, complicated PDS (Product Disclosure Statement). These statements are often filled with jargon and 'fine print' that's difficult for most people to interpret.

An example Mihm gives is the policy clause on vaccinated illnesses that aren't covered even if your pet is vaccinated, hidden within the fine print of pet insurance terms and conditions. This clause was included in all policies we looked at that were underwritten by Hollard, including pet insurance from Kogan, Real and RSPCA.  

"They will not pay for treatment if your cat or dog gets certain illnesses for which a vaccine exists, even if they are vaccinated. This is often buried within complex PDS documents," says Mihm.

CHOICE want to stop insurers profiting from unfair terms

We've recently made a submission to the federal government, calling for it to close the loopholes that enable insurers to get away with these unfair contract terms.

"As it stands, Australians are currently protected from unfair contract terms in a gym contract but not, for example, in a home and contents insurance contract or pet insurance contract," says Veyret.

"There's just no justification for this and it's time the government did something to protect consumers and stop insurers profiting off unfair terms." 

Veyret says that insurance lobbyists will fight tooth and nail to block this reform but that CHOICE is firmly in the corner of everyday Australians.

"Unfair contract terms cause widespread harm on the financial and emotional wellbeing of so many Australians. It's long overdue that we close these unfair loopholes," says Veyret.