7 January 2025

Travel Insurance beware the Personal Effects Contribution Agreement

Could the insurance companies Personal Effects Contribution Agreement damage your Home Insurance premium if you make a claim on a Travel Insurance policy?

Did you know there is an agreement between Insurers relating to Travel Insurance claims which means that a claim on your travel insurance could affect your Home Contents renewal premium?

The agreement in question is called the Personal Effects Contribution Agreement which affects claims over £150. Under this agreement, as Home Contents policies, Credit Cards and Bank Accounts often have some form of travel insurance cover as part of the normal cover, the Travel Insurance insurer can request contributions from other policies which may also cover the loss you have incurred.

One affected customer discussed his experience on Radio 4. He made a claim under his travel insurance policy with Saga. When he filled in the claim form he discovered he was being asked for information about his bank account, home insurance provider and even details of how he had paid for the holiday. This was so that Saga's insurers "could obtain contribution from them” as bank accounts and home insurance often include an element of travel insurance cover. He felt this was unjustified as he had paid his premium to Saga and expected them to deal with it not "dig around trying to extract cash from third parties”.

Speaking on Radio 4, Steve Howard, Secretary of the Association of Travel Insurance Intermediaries said: "If I was asked to give my bank or credit card details I wouldn't give them to the insurers because they don't need them. They are irrelevant for the claim being made and unless we are getting to the settlement stage and they are asking me ‘how would I like my settlement to be paid?', that is the only time I would provide that information.”

Saga did not want to be interviewed but sent a statement saying: "It is normal practice for insurers when paying a claim to see if they can recover part of the cost from third party insurers. Seeking a contribution from another insurer does not delay settlement of a claim. About 1 in 40 travel insurance claims have a third party contribution averaging £800. This is factored in to the pricing of our travel insurance policies which helps lower the price for all travellers insured.”

Other insurers confirmed that in certain circumstances they may decide to recover some costs under the Personal Effects Contributions Agreement too. However the Radio 4 programme asked 5 leading insurers and none of them were asking customers to write down their bank account and credit cards details on claim forms.

Saga said the agreement meant that obtaining a contribution from other insurers should not affect premiums with those other insurers.

Malcom Tarling from the Association of British Insurers though said that provided you didn't make a claim against your home insurance policy your no claims would not be affected by another insurer requesting a payment under PECA. However, he was unable to confirm that claims through the Personal Effects Contribution Agreement would not affect risk profiles on other policies though felt it was unlikely to impact other areas of the premium.

Further contact from listeners gave evidence that premiums on a home insurance policy did increase due to a claim for lost spectacles on a separate travel policy.

We may often find that a specific item are double or even triple insured, but at the moment the onus appears to be on us to specify what isn't required. When challenged that you could be paying for insurance you can't use, Malcolm Tarling responded saying that if you know your possessions were covered under All Risks cover on your household insurance, you could ask the Travel Insurer to ignore those areas and give you a discount.

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