De-risking insurance renewals

When it comes to renewal time, there is a range of issues that insurers and brokers work hard to iron out in order to make the process easy for customers and keep them covered. Anthony Harrington investigates

Travel insurance renewals were problematic enough before the whole issue got tangled up with the much higher profile debate about the insurance industry’s tendency to favour new customers over existing customers. It seems the world – and the regulators – have finally grasped that all those hefty discounts to attract new business in motor and home insurance, automatically exclude, and are therefore prejudiced against, existing customers. This can become quite invidious when a large insurance provider relies on inertia to keep the existing customer base where it is, while ‘buying’ new business with tasty discounts that are not available to existing customers renewing their policies. Two people being offered exactly the same product by the same provider, at prices that favour the one over the other, tend to exercise regulators.

The same kinds of argument could be stretched to apply to travel insurance renewals. However, since the ‘subject’ of the policy being renewed is a person, we are instantly in a far more complicated world. Objects like property or motor vehicles can break or be stolen, but they don’t get sick or fall down the stairs, creating huge medical bills in the process.

By their very nature, travel insurance renewals involve issues around the state of the traveller’s health – are things still the same, or have they in fact changed? By ‘changed’, we generally mean changed to the point where a reasonable person might conclude that the person’s health has materially worsened, by comparison to their state of health under the former policy.

Two people being offered exactly the same product by the same provider, at prices that favour the one over the other, tend to exercise regulators

If their health has worsened, or they have been diagnosed with a serious condition, or even a not-so-serious condition, which could be adversely impacted while they were travelling, then the insurer is carrying more risk and will want to re-price the policy accordingly.

This is not a trivial matter. If the traveller was diagnosed as suffering from asthma, for example, then catching flu or a bad cold abroad could land them in hospital with breathing difficulties. The resulting bills, particularly in the US, could run to six or seven figures and the insurer would be on the hook for the lot.

Customer expectations

It is no surprise, therefore, that one of the main causes of disputes and interventions by many ombudsmen in travel insurance premium renewal cases involves the tricky question of whether the consumer filled in the renewal application correctly and honestly. Nel Mooy, Head of Travel at AXA Insurance in the UK, points out that one reason why customers might get a shock when they come to renew an annual travel insurance policy with some providers, is simply that being a year older has caused them to cross a critical age band. Risk evaluation tends to be age-related as claims statistics show a pretty clear correlation between age and risk and a number of providers have age bands with significant price increases as one moves up the age band levels.

However, Mooy points out that one of the great advantages of AXA’s travel insurance policies is that they are not age banded. Similarly, AXA also ducks the current existing user versus new user controversy by ensuring that it does not differentiate between customers, new or old, at renewal time. “So, for us, those two big problems are simply not there,” Mooy told ITIJ.

The problem about changed circumstances, of course, remains. “It is very straightforward. If your circumstances change, the price of your insurance premium changes accordingly. So it is really important to get all the information required for the policy renewal in good shape, in good time,” she said.

Mooy says it is absolutely up to AXA to ensure that customers understand what the basis of the renewal is. That principle holds good across all the company’s insurance offerings. However, with insurance products based on an individual, the person’s health becomes a primary topic. As Mooy puts it, that involves a different kind of conversation to that which would take place between the consumer and the provider for a household policy.

“We understand that conversations about health are extremely personal. That gives it a different feel to other kinds of insurance protection policies, but it is not fundamentally different,” commented Mooy. “If you extend your house with multiple additional bedrooms, that changes the nature of your household and buildings insurance. If you modify your car to substantially increase its power and speed, with a view to racing it, that changes the motor insurance policy. So, it is only to be expected that if your health changes, the policy premium will be impacted.” If the consumer blatantly ignores this fact, then problems will most certainly arise if they make a claim.

Mooy points out that AXA’s approach to single-trip travel insurance policies is very generous, in that if the individual’s health changes after they have bought the policy, the policy coverage still stands, with no additional costs being involved. Similarly, if an individual renews their annual travel policy, and answers all the questions honestly and appropriately, then they are covered for the whole year, regardless of whether their health deteriorates through the year. However, when they come to renew their policy the following year, logically, they will be expected to be honest and open about the deterioration and their next annual travel insurance policy will be priced accordingly.

“This need not be a complicated matter. We ask the consumer if anything has changed with respect to their health. The health screening that the policy requires is then valid for the next 12 months. We think this is a very strong selling point for us, as quite a few travel insurance providers will expect customers to flag up any health issues before they travel and will impose higher premiums if they feel these are warranted,” said Mooy.

AXA’s screening for renewals is based on the customer telephoning into their call centre, at which point a representative will take the customer through the health screening process. “Our people are trained to do these health assessments very tactfully and thoroughly. We train our team well so that they know to ask probing questions if there are grey areas. We are not in the business of trying to avoid paying claims. We invest heavily in order to ensure that customers are covered and can have peace of mind when they travel abroad,” Mooy told ITIJ.

We are not in the business of trying to avoid paying claims

The problem of how to assess the risk in some of the grey areas that abound in health issues takes significant skill on the part of the agent. Take back pain for example. It can range from ‘it hurts a bit’ to ‘I can’t walk anymore’. Mooy says that her team has a range of objective questions to help the agent create an appropriate risk profile for the customer.

A helping hand

Insurance brokers play a significant role in assisting customers when it comes to policy renewals. Graeme Trudgill, Executive Director at the British Insurance Brokers Association (BIBA)  points out that brokers operate a diary system that will remind them to notify a customer in advance of the expiry of a multi-trip policy. “They will alert the customer to the need to renew their policy if they are due to travel, and some will remind the customer how much they paid for the policy last year and will flag up for them the need to report any changes in their health,” he said. Some firms also give existing clients a loyalty discount, based on the new premium, he notes.

Trudgill further points out that the Association of British Insurers/BIBA Guiding Principles and Action Points on general insurance pricing were published a year ago, back in May 2018. “The aim of the guidelines was to move the industry away from penalising long-standing customers, and we are pleased with the progress made over the year. We recently surveyed our members and there has been a high level of take-up and awareness of these issues,” he told ITIJ.

Clearly, everyone in the industry understands that premiums have to reflect risk, but Trudgill points out that it is not often that consumers declare a new medical condition at renewal time. What might happen, he notes, is that if a consumer has a pre-existing medical condition that has been priced in to the expiring policy, and if that condition has been stable for a long time, the provider might actually lower the new premium. The period of stability may well show up as a reduction in the assumed risk, resulting in an improved price for the individual.

“We appreciate the re-screening process is a very personal process with people and must be dealt with sensitively and feedback from Trustpilot and live chat prove this is one of the hardest parts of the renewal process for clients when some feel that the only change in their condition is that they are another year older,” commented Trudgill. “But it is important that a full declaration is made and the correct cover is in place for a further year. Technology is streamlining the renewal process as the ability for customers to do online medical screening is being rolled out more widely, making it more convenient for them.”

 everyone in the industry understands that premiums have to reflect risk

Importantly, BIBA has a ‘Peace of Mind’ guarantee in its BIBA Holiday Travel Scheme. This provides a fallback position for a consumer if, during the period of insurance, their health deteriorates significantly, to the point that the provider feels they are not in a position to offer renewal terms. The fallback, to quote the Peace of Mind guarantee, is that ‘upon request, we will extend cover for up to six months from the expiry date of the policy to cover you for each journey booked prior to your deterioration of health, subject to you paying the appropriate single premium trip for each journey’.

Of course, the guarantee does not specify what the ‘appropriate single premium’ will be, and there is always the chance that it will be too high to be either affordable enough or attractive enough to the consumer. But at least there is a guarantee that insurance will be offered for the said six-month period.

Mind the gap

Trudgill points out, too, that the whole issue of multi-trip travel insurance renewals is limited in scope, since, as he puts it, “In my experience, there is a fairly low retention by providers on annual multi-trip policies because often the insured doesn’t do the same amount of travelling each year.” If your policy ends in June, but you are not going to travel again till October, the logical thing to do is to buy a fresh multi-trip policy in October. Why would you want to roll-over the old policy when it will cover three months when you are not travelling?

However, as Marie-Louise Sturm, Account Supervisor at Finn Partners in the US, notes, annual policies are very convenient and useful for anyone who travels frequently, whether for business or leisure. “Annual policies are a popular choice among travellers as they conveniently extend travel protection for a year’s worth of trips, providing greater peace of mind,” she notes. In fact, Finn Partners has seen sales of annual travel insurance policies increase significantly, which the firm puts down to increased consumer awareness of this option.

Sturm points out that engaging customers outside of travel insurance is a great way to build a relationship with the customer, and that goes a long way towards helping with customer retention. That’s why the company offers its TravelSmart mobile app to consumers, which allows users to review their policy in the app, as well as file and track claims, amongst other benefits.

“We do not have auto-renewal of travel policies in the US, so we encourage customers to closely track the expiration date of their annual policy so that they are not without coverage,” said Sturm. Naturally, this potential for travellers to be unaware they are travelling without cover is one of the key reasons that automatic policy renewal is more popular – though bound by national laws – in some other countries. 

An annual policy will always look more attractive to someone who does multiple trips, since buying insurance on a trip-by-trip basis both imposes a continuing chore and can end up being considerably more expensive. People will have differing views on how many trips in a year make an annual policy better than a trip-by-trip approach, but simple math will generally solve the problem. For insurers, the work to retain customers, ensure they are covered for their changing needs, and meet their expectations around coverage issues continues apace.