The timeouts configured in Upstream Connection have no effect on the timeouts when Camel Policy is used (further details related to http/https in point 4 below). The expectation from application perspective is that the timeout should apply whether Camel Policy is used or not. 

The following JIRA/Comments have created for clarifications related to this issue.

1. Upstream in docs seems to be referring to API backend - THREESCALE-10580 has been created for clarification.
2. Note regarding load balancing disabled - THREESCALE-10581 needs clarification on whether this means Upstream Connection policy does not apply when Camel Policy is used.
3. Upstream Connection is configuring NGINX directives, which would take effect only when APIcast connects to upstream (API backend) . It is unspecified if this would work when Camel Policy is being used i.e. if Camel Policy is compatible with Upstream Connection or not.
4. Timeouts configured in Upstream Connection do work when http is used ( http_proxy, and API backend accessed using http), but not with https (https_proxy, API backend accessed using https )

Pending clarifications to the above, marking this issue as a bug rather than an RFE.