Travel insurance and subsequent changes to medical conditions

spook

I have a question for anyone who knows about travel insurance:

Can travel insurance companies really change the terms of a policy due to changes in medical conditions after the policy has been purchased?

I booked a travel insurance policy (with Columbus Direct) last November for a trip this coming April for me and my wife and daughter. Both of them have pre-existing medical conditions which needed to be declared, so I went through the screening process and answered all of the questions honestly, then paid the premium which was around £60.

Then, a couple of weeks ago my daughter had an overnight stay in hospital due to one of the conditions we had declared. As the documentation stated that they must be informed of any changes, and one of the questions specifically asked about overnight hospital stays, I rang customer services and told them about it.

Their response was that they could no longer provide cover for my daughter's condition, so I told them the policy was no longer suitable for my needs and asked for a refund. I was told I could only have a pro-rata refund (i.e. I would lose around a third of the premium).

What I'm confused about is this: surely the only medical conditions that would be relevant are those which existed at the time the policy is purchased? Why would subsequent events change the cover they provide - surely that's the whole point of having insurance? What if something like this had happened the day before the holiday?

Should I not have rung them to declare it, and if I hadn't, would they have used it to get out of paying a claim?

I do accept that they provided me with two months' cancellation insurance, but surely it's not fair to charge a premium for this based on a pro-rata proportion of the total premium, because the majority of the risk for them is during the 8 days when we're abroad, not the 6 months prior.

(Note: as things turned out, the woman on the end of the phone made a mistake and refunded me the whole premium, so I wasn't out of pocket - but this was purely due to an error on her part. She seemed to think the policy had been taken out that same day & I didn't correct her. I have now re-booked the insurance with InsuranceWith, who seem a bit more clued up and weren't much more expensive).