Ashley Seager’s expensive NatWest policy failed to pay out, so he complained to the ombudsman – only for the label of quality to be dismissed as ‘meaningless’

NatWest’s travel insurance was one of the main reasons that I, like so many other of the bank’s customers, have an Advantage Private account. For an annual fee of £240 it says it is “packed with exclusive features”, chief among them its five-star Defaqto-rated annual worldwide travel insurance, which the bank claims is worth £160 alone.

Last year, I put it to the test. I took my family to Canada on holiday – only to be stranded by the collapse of Zoom Airlines. But instead of the insurance kicking in and returning us home, NatWest refused to pay out. To my surprise – and cost – it said the insurance did not cover the failure of a scheduled airline.

Furious, I took my case to the Financial Ombudsman. Surely, I argued, “five-star” had to mean that it was a fully comprehensive policy that would cover me in most eventualities – such as, in my case, a scheduled airline going bust. After all, NatWest proudly displays its five-star rating prominently over its literature for the Advantage Private account.

A year later, I have finally had my complaint judged by the ombudsman. He has found in favour of NatWest, and I won’t be getting any compensation. But the reason why I’ve been rejected makes for interesting reading. The ombudsman, it appears, thinks that the five-star ratings that financial companies use to promote their products are entirely meaningless.

“I do not consider that there is any common agreement as to what the phrase means. In my judgment the term “five-star” has no specific meaning and amounts to nothing more than “puff”,” wrote ombudsman Reidy Flynn in her judgment.

I contacted the ombudsman’s office to discuss the lack of logic, but it declined to comment. Its basic judgment is that the Natwest Advantage Private bundled account with its five-star travel insurance was not obliged, in any way, to cover for the failure of an airline, or any other transportation company. I should have read the small print, no matter how small.

My complaint had made the following points: that it was unreasonable that a five-star policy did not cover airline failure – any normal person would expect to have such a thing covered if they were travelling abroad; that it was unreasonable that such an exclusion would not be on the list of “significant exclusions” at the front of the policy; and that it was unreasonable that it should be buried in the small print.

I had tried to find out, prior to travelling, whether this point was covered but could not get through to NatWest on the phone, or find the relevant documents on its website. I could not find the documents at home, either, although NatWest insists they were sent. So I relied on the “five-star” rating, thinking it sounded good.

I have since learned that across the insurance industry not many policies cover airline failure. But the Post Office does, and that’s not an obscure little company. It would have cost £1-1.50 per person for NatWest to cover their policy holders for a year against airline failure. Was it reasonable to expect them to have done so for its premium account customers? You might think so, but NatWest did not, nor did the ombudsman.

Defaqto was bemused by the ombudsman’s comments. “I am surprised it has couched it in those terms,” said its head of research, Brian Brown. “Our ratings are independent but do not purport to offer any kind of legal guarantee of what a product may contain. People should check the details.”

He denied that banks and insurers pay a fee to Defaqto to use their ratings, implying the company was biased towards issuing “five-star” ratings. He added that the company only issued five-star ratings on 10-12% of products and no comnpany pays to appear in its analysis. The bulk of its revenue comes from a business-to-business database it compiles and sells to banks and insurers.

Perhaps, though, if the ombudsman service thinks five-star ratings are meaningless and “puff”, it, or another authority, should move to ban them? That’s the only conclusion a reasonable person could reach.

Travel insurer agrees reader’s friends were due a full refund

My elderly neighbours are having terrible difficulties claiming money back from Insure and Go after they had to cancel a once-in-a-lifetime trip to the US to visit family. They have had some money back, but it seems the airline they were due to use is withholding a large chunk of the £2,487 they paid. They have been caused much distress and ill health due to the worry. EW, Braintree, Essex

This case has taken some considerable time to unpick, but here goes. Your neighbours paid £2,487 for four return flights to San Francisco through travel agents Chelmsford Star Coop and then, sensibly, took out their own travel insurance with Insure and Go, paying £180 for a single trip policy.

Due to ill health, the trip had to be cancelled and a claim was submitted to Insure and Go. After deducting the airline administration fee and being reimbursed the numerous US taxes and UK air passenger duty, there was still a shortfall of around £800 which couldn’t be explained, and which your neighbours wrongly blamed on the airline. After investigation, I discovered that the flight broker used by Chelmsford Star had wrongly included the £197 fuel surcharge per ticket in the category of “tax” on the invoice, for which the insurer would not ordinarily be liable. After I pointed this out, Insure and Go agreed that the problem stemmed from the documentation it was sent and a further no-quibble refund of £788 is now on the way.

Your neighbours were overjoyed and I know that this money, which they thought was lost, will make a big difference to their lives. If ever there was a case of job satisfaction as the Capital Letters columnist, this was it.

Answering your letters this week is Steve Playle, Trading Standards officer and Team Leader at Surrey Trading Standards Service.

We welcome letters but regret we cannot answer individually. Email: capital.letters@guardian.co.uk. Please include a daytime phone number.