Costco Credit Card Switch Came With Unexpected Side Effect: Lost Insurance

Image courtesy of Mike Mozart

When Costco announced it was ditching its exclusive co-branded American Express card in favor of a Citibank-issued Visa card, customers worried about the various ways this switch could affect their finances and credit, but one family says the change in card networks resulted in them losing an insurance policy.

Sacramento CBS reports (warning: link contains video that autoplays) that shortly after Costco switched from AmEx to Visa in June, an elderly couple was notified that their American Express Accident Guard Insurance – which would have provided financially for their grown children if they died in an accident — had been canceled.

That notification came too late, however, as the couple says they received a letter from AmEx two days after the policy was actually canceled, giving them no time to find an alternative option to keeping the policy.

The letter was dated June 25. However, it stated that the policy, which the couple had paid $21/month for nearly 12 years, would be terminated effective June 23.

When the couple contacted AmEx about the cancellation, they say they were told there was nothing that could be done. The couple said they now won’t be able to protect their children financially, as it would be too difficult and costly to get a new policy.

Left with little to no recourse, the couple contacted CBS Sacramento to find out if AmEx’s actions were legal.

To that end, CBS Sacramento’s Kurtis Ming contacted the California Department of Insurance, which confirmed that AmEx can’t just cancel a policy with no notice.

Under state law, insurers must notify customers of cancellation in writing between 10 and 60 days before the policy is terminated.

Much like Costco, AmEx, and Citi’s actions prior to the switch when customer were looking for information on the change, the companies sent CBS Sacramento in circles for answers: Costco pointed to Citi, Citi pointed to AmEx, and AmEx pointed to Citi.

Finally, AmEx told CBS Sacramento that it had re-enrolled the couple, admitting that some customers got lost during the switch.

“Enrollment in certain insurance products were disrupted by the transfer of the card account to Citi, because these products were offered only to American Express card members,” the company said in one of its three statements. “Former Costco card members, who had one of these products charged to their Costco American Express card, can continue enrollment in these products using another American Express card, if they call us promptly and authorize the charge.”

The company did not specify how many customers were affected by the so-called “disruption.”

Call Kurtis: Customers Lose Insurance In Costco Credit Card Switch [CBS Sacramento]