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Out-Law News 1 min. read

Insurer agrees to change contract terms after regulator deems them to have been contradictory


An insurance company has agreed to change the terms of a travel policy it underwrites for Lloyds Banking Group after the regulator said that "contradictory" clauses would confuse consumers about their rights to bring a claim.

The Worldwide Travel Insurance policy offered by Lloyds and underwritten by AXA Insurance explained that policy holders would have a right to claim back money lost as a result of their travel provider becoming insolvent, subject to certain conditions. However, a separate clause outlined that policy holders would not be covered for "any unused travel costs arising from the insolvency of your transport provider".

The Financial Conduct Authority (FCA) said that the clauses were "contradictory". The regulator said it believed AXA had not expressed the terms of the policy in sufficiently "plain and intelligible language", as required under the Unfair Terms in Consumer Contracts Regulations.

"One clause indicated that losses arising from the failure of the transport provider (e.g. the airline company) were covered, while another clause indicated that they were not covered," the FCA said. "We therefore believed that the original clauses would confuse customers about whether or not they were able to recover losses arising from the failure of their transport provider."

The terms of the policy have now been amended and explain the circumstances in which policy holders can claim back extra expenses incurred as a result of their transport operator going insolvent as well as what is not covered under the contract, according to an agreement formed by the FCA and AXA (4-page / 115KB PDF).

AXA said that the new terms will apply to existing customers and that it has conducted a review into refused claims made by policy holders in the past under the old terms. The company said that some old claims that were refused may now be accepted and added that it has changed the way it handles claims to account for the new terms, according to the agreement.

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