Travel insurance

If you bought travel insurance over the phone, along with your holiday or your flights, can you remember exactly what was said? If an insurer asked you to prove that you really had told them you had a heart complaint, how certain would you be about the phone conversation?

Or if you arranged a loan over the phone and agreed to payment protection insurance, can you remember all the details of what it was going to cover?

All of you with perfect memories capable of total recall should take a round of applause and leave the page. But if you're an old duffer like me, with a memory that just about stretches back to last night, it isn't that easy. And it can mean big problems when it comes to settling disputes over insurance claims, because what was said on the phone will often be the key to whether the consumer or the insurer is in the right.

At present, there is no legal obligation for insurers to record all their sales calls. And without recordings, all those rushed, anonymous call-centre conversations are left wide open for interpretation.

But rulings by the Financial Ombudsman, published last week, should give consumers greater confidence in challenging insurance companies if they feel that their version of events is not being given a fair hearing.

In disputes over what was offered and accepted on the phone, where there is no recording, the Financial Ombudsman says it can give the customer "the benefit of any doubt", even when they should get nothing according to the terms of the policy.

And the implication is that if insurers want to avoid losing such appeals, they should make sure that calls are recorded. As an example, the Financial Ombudsman's office cites a customer who won an appeal against an insurance company over a ruinously large medical bill from a holiday to the United States, with the dispute hinging on the contents of an unrecorded phone conversation.

The insurer claimed that it had told the couple that they needed to pay extra on their travel insurance if they wanted to cover the husband's existing heart condition - and this had been rejected. But the husband and wife were left with the impression that they didn't need to pay extra.

Unfortunately the husband had a heart attack, and the hospital fees in Las Vegas were £250,000, which the insurer refused to pay - a decision which the customer challenged, saying that she would have paid extra if she had been told it was necessary.

Both sides claimed to be in the right, leaving it down to one person's word against the other. And with the insurance company unable to show that it had provided the warning, the Financial Ombudsman found in favour of the consumer.

Without a record of the telephone conversation or any written confirmation of the agreement, the ombudsman decided that the "position regarding the heart condition was left open to misunderstanding".

David Cresswell, spokesperson for the Financial Ombudsman's office, says it is more reasonable to expect the insurance company, rather than the consumer, to prove what was said on the phone. Even the intonation of a voice or the phrasing of questions could lead to confusion.

And when there are disputes, it's up to the insurance company to show that customers were given enough information to know what they were buying. Otherwise they risk having to pay out.

The Association of British Insurers says that the recording of calls is a commercial decision to be taken by individual companies.

As an example, Eagle Star records all its life insurance calls - and about two-thirds of its total number of calls, including home and motor insurance. It would like to move to recording all calls, which it says would be in the interests of both customers and insurers.

But the irresistible logic must be that a more consistent and comprehensive system of recording calls is needed by all insurers, particularly when so many more transactions are carried out on the phone.

Because in practice, from the punter's perspective, buying insurance on the phone can be a leap in the dark. You don't know who you're talking to or what questions you should be asking. And if you have to make more than one call, you can take a different interpretation from different conversations.

When you're buying insurance with a flight from a budget airline, you're not exactly getting specialist advice. I've had longer conversations over whether to have plain or pilau rice with a takeaway. And it's so easy for what the ombudsman calls "innocent misunderstandings" to arise.

So for once, let's hope Big Brother is listening in to our conversations.