New Zealand insurers face fresh scrutiny of exclusion wording after a travel insurer reversed a declined claim, once the dispute resolution scheme Financial Services Complaints Limited (FSCL) questioned whether a cruise ship met the policy's definition of a “public place.”
In mid-2025 a cruise passenger, referred to as Melody, asked fellow travellers to watch her mobile phone and prescription glasses before swimming, placing them under a towel on her seat. She returned about 30 minutes later to find them gone. CCTV reviewed with cruise staff showed a person nearby using a phone, but could not establish whether the device was hers. She noted a gap at the rear of the seat and considered the items may have slipped into the ocean.
Melody claimed $4,000, the policy maximum and below her estimated $4,270 loss. The insurer declined, citing an exclusion for belongings left unattended in a public place. The policy defined a public place as “…. any place to which the public has access and includes but is not limited to shops, airports, train stations, bus stations, streets, hotel foyers and grounds, restaurants, beaches, and public toilets.”
FSCL queried whether a cruise ship met that definition, observing that such vessels are privately owned and operated with access controlled through valid passenger tickets. The insurer reviewed its position, and the parties settled for $2,600. FSCL noted the case shows travel insurance wording can be open to interpretation and that reviewing definitions may assist insurers and consumers in understanding how terms apply across settings. For claims teams, the point is practical: an exclusion drafted with land-based public spaces in mind may not withstand scrutiny aboard a privately operated vessel, and the interpretation applied at first decision can determine whether a claim proceeds or escalates.
The case surfaces as formal disputes rise across New Zealand’s resolution schemes. FSCL opened 235 disputes between July and December 2025, up from 167 a year earlier – a 41% increase. Disputes involving insurers rose to 31 from 23 over that window, outpacing lenders, the largest category, which moved from 73 to 77.
The movement aligns with the Insurance & Financial Services Ombudsman (IFSO) Scheme, the larger of the approved schemes and the one to which most licensed insurers belong. The IFSO Scheme accepted 600 disputes in the year to June 30, 2025, a 25% increase on the prior year and more than double its 2022 total of 285. The figures cover different reporting periods and category definitions, so are not directly comparable, but both trend upward. Travel policies accounted for 18% of the IFSO Scheme’s investigated cases, within a general insurance segment that made up 67% of the total.
Both schemes linked the rise partly to economic conditions. “The increase reflects wider economic challenges that many New Zealanders continue to face. We expect high dispute levels to persist as long as economic conditions remain difficult for many,” said FSCL Financial Ombudsman Susan Taylor. IFSO Ombudsman Karen Stevens pointed to unresolved internal complaints: “We’re seeing a growing number of complaints that remain unresolved even after going through the financial service providers’ internal processes. These cases escalate into disputes that require formal investigation by the IFSO Scheme.”
The rising caseload coincides with the bedding-in of the Conduct of Financial Institutions (CoFI) regime, in force since March 31, 2025, which requires licensed insurers to hold a conduct licence and maintain a fair conduct programme. The regime’s fair conduct principle applies to claims handling and complaint responses, placing decisions such as the one in the cruise case within the Financial Markets Authority’s (FMA) conduct mandate.
The FMA has signalled claims processes are an early focus. In a July 2025 review of insurers’ responses to the 2023 North Island weather events – catastrophe claims rather than travel, but instructive on the regulator’s direction – it identified complaints handling and communications among six areas for improvement and said its initial supervision under CoFI would concentrate on the product and service reviews within fair conduct programmes. The regulator added it would use its full range of interventions, including feedback, public warnings, enforceable undertakings, and litigation, to address conduct gaps.
Further change is scheduled. The Contracts of Insurance Act 2024, due to take full effect on November 15, 2027, modernises insurance contract law and, in FMA guidance to insurers, is expected to be operationalised across business practices including claims handling. Taken together, the cruise case, the disputes data, and the incoming reforms point to the same conclusion for the sector: exclusion wording and first-decision interpretation now sit at the intersection of dispute-resolution risk and conduct regulation.
