A raft of banks and other credit card issuers have been forced to improve disclosure of terms and conditions for controversial travel insurance policies marketed through rewards schemes.

An investigation of 17 credit cards by the Australian Securities and Investments Commission found that cardholders were sometimes not entitled to travel insurance because of exclusions and eligibility criteria specific to rewards programs.

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The ASIC review of credit card travel insurance was triggered by a spike in the volume of consumer complaints made last year to the Financial Services Ombudsman.

The complaints included uncertainty around who was covered by the policy, the extent of exclusions and eligibility requirements.

In response to concerns raised by the regulator, banks and other lenders have agreed to amend their terms and conditions to clarify cardholders’ entitlements to the insurance cover.

Many of the rewards schemes failed to adequately communicate to customers that travel insurance was not available to them under certain circumstances:

– Some credit card rewards schemes deny cover if cardholders do not meet monthly spending thresholds

– Others limit cover to only one person, meaning that supplementary cardholders are not protected by the policy

– An insurance entitlement is sometimes denied to some cardholders if they use rewards points to pay for the cost of travel

ASIC also found that some of the financial institutions investigated were not providing direct links on their websites to the terms and conditions of travel insurance policies offered through rewards programs.

While the policies were promoted as “complementary” add-ons to members of credit card rewards schemes, ASIC found that some cardholders were incurring annual fees of more than $500 to be entitled to the insurance.

ASIC deputy chairman Peter Kell said the 17 card issuers had been requested to clearly disclose whether exclusions applied to the policies.

“As travel insurance may not be at the forefront of the consumer’s mind when obtaining a credit card, improved disclosure will help consumers understand and claim,” he said.

“Having travel insurance is essential for those heading on an overseas trip, to provide cover for when things go wrong.

“Credit card issuers and insurers must clearly set out what is and what is not covered by a policy, so that consumers can work out if they are adequately covered.”

While ASIC did not name the financial providers exposed to the investigation, they included the four major banks, credit unions and other small credit card issuers.