Why insurance companies need to charge more
Dr Simon Worrell, Founder and Chief Medical Officer (CMO) of Chiron International, posits that a minimum price for travel insurance may not be a bad thing
Back in the day when I first started out in international assistance, we were becoming aware of the competition between insurance companies leading to ever-decreasing costs of premiums for travel health insurance. We were suspicious of cheap policies that at the time cost the same as a round of drinks.
Given the expense of hospital treatment and safe transportation, our puzzled response was predictable: how could anything worthwhile be that cheap? Of course, since then we have seen a substantial increase in treatment and repatriation costs in conjunction with a steady plummet in the cost of policies. It is no longer a round of drinks that policies cost, but one drink – and I don’t mean a single malt!
A price race to the bottom
We all know there has been a race to the bottom in pricing for many years now. To try and balance the books, companies have often responded with long and complex policies, excluding many from cover in the small print, and a concentration on risk rating, making those of us who are illest stump up more for going on holiday.
Of course, paying almost nothing for a cheap-as-chips policy is fine, as long as you don’t need to use it – which is the case in the vast majority of happy holiday experiences. The problem is when something goes wrong, and a patient finds that their policy is found wanting.
Let me be absolutely clear: it’s not that some companies are acting outside of the law; the policies that have been purchased do have exclusions that often deny patients from cover. But what I’ve seen over the last decade is that, given the financial constraints placed on companies, there has been an increased impetus to stick rigidly to the letter of the policy wording, allowing patients to be denied cover on the basis of a sometimes fairly minor infringement.
In the past, the medical team would have been asked if the patient had at least tried to make an honest declaration when buying the policy. If the patient omitted a couple of incidental details not relevant to the medical claim, we may have been able to say that an honest declaration had indeed been attempted and the case would have been paid in full.
However, patients seem to be less easily forgiven these days. For instance, does the fact that a patient forgot to mention a prescription for sleeping tablets on one occasion really warrant a policy denial for an admission for a severe chest infection years later? I think not.
Tricky terms and conditions
There has also been a rise in partial resolutions recently. This is where a patient deemed to have made omissions when applying for the policy is charged a proportion of the costs, instead of receiving a flat-out declinature. This sounds reasonable on the face of it – until you consider the effect that it has on the patient.
It’s easy for us to say that people should read the copious policy documents and spot when such a clause would render that particular policy useless
As hospital costs are considerable, even if a patient only has to pay, say, 20% of the costs accrued, this could easily be a life-changing amount for them and their family. I’ve heard tell of cases where, on being advised of a partial resolution, patients have self-discharged from hospital within hours. If they have received enough treatment by that stage, they may be safe to recover in a hotel. If they are self-discharging earlier on in the treatment course, things might be more dangerous.
Moreover, the common policy clause that denies cover to anyone awaiting hospital treatment would automatically exclude cover for around seven million people in the UK at the time of writing – the current number on the National Health Service (NHS) waiting list.
It’s easy for us to say that people should read the copious policy documents and spot when such a clause would render that particular policy useless for them. But I think most of us understand that when people buy a travel policy, they do expect that they would be protected should a medical event occur.
When we buy a car, we can go for the bells and whistles of an Audi, or something more everyday. Whatever we buy, we expect the car to have wheels and get us from A to B. With travel health insurance, many of our policies have no wheels.
The bottom line is that, despite our efforts, we have not been successful in halting the race to the bottom. Far from it. In fact, it is getting worse – and some patients are suffering. So, given all this, is it time to think the unthinkable and consider compulsory minimum pricing across the industry?
A minimum price?
The advantages of a minimum price are clear. We could strip out the clauses from our policies that exclude many – such as the waiting-list exemption. We could also stop partial resolutions in favour of covering the claims in full.
But there are more controversial options that could also be on the table. If we increased premiums sufficiently across the board (say the equivalent of half a day’s hotel rate on a two-week holiday – really not an exorbitant proposal) we might be able to make a real change to our industry and stop the need for risk rating.
I’ve often thought that our friends overseas must think us strange in the UK, where we pioneered free healthcare at the point of service for all with our NHS, but as soon as we step outside of the country, those who are poorliest must cough up a premium for travel health insurance. With a larger basic premium for all, perhaps we can treat those who have been dealt a rough hand in life’s genetic lottery the same as those of us who have been lucky. What could be more British?
With travel health insurance, many of our policies have no wheels
Competing through innovation
Companies still have to be competitive, of course. So, how would they compete when they are disqualified from the race-to-the-bottom policy pricing? I think the answer is in the provision of their services to the customer.
If the UK had compulsory minimum pricing, our insurers would show their differences by the range and quality of the services that they provided.
For instance, companies would be able to provide extra support for travellers on the cusp of a problem: counselling for those depressed or expertise with neurodiversity when needed.
We could show our innovation by providing new and compelling reasons for people to take out our travel policies. No longer hamstrung by a lack of funds, or the constant imperative to do more with fewer staff.
Clearly, if we proceeded with such an approach it would have to be instigated by a third-party regulator, an industry-wide ‘gentleman’s agreement’ to price-fix being illegal. Our responsibility would be to lobby the new government, stating that despite the very considerable uptake of travel insurance by Brits on holiday, policies are now so cheap that many are not fit for purpose and people sick abroad are finding themselves not covered when they need it most.
Having lobbied parliament during the Covid-19 epidemic for the novel venture of setting up testing at airports, aiding trade and tourism, I know how troublesome this can be. We had a lot of pushback at the time from the establishment in the form of Public Health England.
However, with persuasive arguments, data and perseverance, we were able to win our case, heralding the first national airport testing campaign. We could do the same with minimum pricing. As the new government in the UK has championed change to make the lives better of the many, this should be just up their street. Let’s try?