27 july 2022, 20:05

The FOS tells what to look out for when insuring luggage

The Financial Ombudsman Service (FOS) receives appeals from consumers of financial services on disputes with insurance institutions associated with the payment of insurance in respect of luggage. The practice of consideration of such appeals has revealed the nuances of which the client of the insurance institution should be aware when entering into an insurance contract, as Head of the Ombudsman for financial services consumers support Service (OFSC) Olga Kraynova reported.

According to her, a consumer should pay attention, first and foremost, to the terms and conditions of insurance, based on which the contract is concluded.

“Often insurance programmes for people travelling outside their permanent place of residence contain provisions on insurance coverage outside the place of the consumer’s residence. For example, a consumer lives in St. Petersburg and upon arrival at Pulkovo airport from a trip he has lost his luggage. Under insurance terms this event will not be considered insured, because these events occurred within the boundaries of the settlement, which is for the insured person’s permanent residence, i.e. outside the insurance territory”, Olga Kraynova continued.

She specified that in accordance with some insurance terms and conditions, the territory of insurance shall be deemed the territory of the Russian Federation, in particular, beyond 100 km from the administrative boundary of the settlement serving as the place of permanent residence for the insured person.

Another example related to the territory of insurance is that under most insurance terms and conditions, a trip of the insured outside his or her place of permanent residence is considered travel. “In that case, if the consumer lives in Ryazan and the insurance policy is purchased in one of the Moscow airports, then under the terms of insurance it will be assumed that the insurance policy has been purchased while travelling and events occurring during that trip will not be recognised as insurance events under such a policy,” the Head of the OFSC noted.

Besides, it is well worth for the consumer to look at the limits of the insurer’s liability for certain items of luggage, which are also contained in the rules of insurance. “It is also worth paying attention to the luggage items that are subject to exclusion from insurance coverage, such as cash in Russian and foreign currency, bank cards, articles of precious metals, precious and semi-precious stones, and fur products,” Olga Kraynova added.

She said that the most common disputes in which consumers turn to the Financial Ombudsman is disagreement with the amount of compensation or the company’s refusal to pay the insurance indemnity.

In case of disagreement with the amount of insurance compensation paid, the essence of the dispute is usually that the consumer expects to receive an insurance compensation that corresponds to the full amount of loss or the insurance sum specified in the insurance contract, continued the Head of the OFSC. However, under the terms of insurance, the insurance indemnity is limited for certain types of luggage.

“For instance, insurance contracts can stipulate that in case of destruction or damage to such luggage as large-sized electronics, batteries, audio, photo and video equipment, computer units, etc., the insurer makes payments only by the weight of the damaged or destroyed item of luggage. In this case, the limit of payments for each damaged or destroyed luggage item is 25% of the sum insured, specified in the insurance contract for the corresponding event,” Olga Kraynova said.

“Refusals by insurers to pay insurance compensation may also arise from the fact that the lost luggage was not registered in the name of the insured person,” the Head of the OFSC concluded.

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