A travel insurer has been found to have acted in bad faith and materially breached its fair conduct obligations after it steered a seriously ill client towards an airline that didn’t know about her medical conditions.
The Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) upheld a complaint from the policyholder, who fell ill in Bali. It ordered the unnamed insurer to pay her business-class flights home, her travel companion’s costs, and $5000 for special inconvenience.
Two doctors told the woman she would need a companion to fly home, and Air New Zealand’s medical team said she would need a nurse or doctor with her. The insurer’s emergency assistance line took a different view. It told her she was fit to travel alone and that medical escort costs would not be covered.
Because Air New Zealand would not carry her without an escort, the insurer suggested she book with another airline and not tell it about her conditions. It offered to cover a business-class seat for her, but not for a companion. She arranged for a friend who was a former paramedic to fly to Bali and accompany her, booking cheaper business-class fares for both.
On the way home she had a medical emergency on the flight to Sydney and was taken to hospital on landing. The pair then had to buy new flights to New Zealand.
The insurer paid only part of her claim. It reimbursed the equivalent of the Economy Skycouch seat she had originally booked, declined the companion’s flights and the extra business-class cost, paid half of what it considered shared expenses, and refused the rebooked flights from Sydney.
The IFSO Scheme found the insurer’s handling went further than unfair treatment and supported a finding of bad faith. It also found a material breach of the fair conduct obligations in the Financial Markets Conduct Act 2013, and a failure to provide the service with reasonable care and skill under the Consumer Guarantees Act 1993.
Ombudsman Karen Stevens said the scheme was seriously concerned by the airline suggestion.
“This directly risked Cara’s health in order to reduce costs,” she said.
The finding is one of the clearest examples so far of a dispute scheme applying the fair conduct regime to claims handling. Since March 31, 2025, the Conduct of Financial Institutions regime has required licensed insurers to maintain a fair conduct programme. Its fair conduct principle covers claims handling and complaint responses, bringing decisions like this within the Financial Markets Authority’s remit.
Travel complaints are a growing share of the IFSO Scheme’s workload. It accepted a record 600 disputes in the year to June 30, 2025, and travel policies made up 18% of investigated cases.
For brokers, the case shows that the assistance line, often run by a third party, counts as part of the insurer’s conduct. A cost-driven call made in an emergency can now lead to a bad faith finding and a conduct breach, not just a partly paid claim. Brokers supporting a client through a medical emergency overseas should keep a record of the medical and airline advice the client receives. Where the insurer’s instructions conflict with that advice, they should challenge them in writing.
The case adds to a run of IFSO travel decisions this year, including one that went against a family over an airline cancellation exclusion.
