The cost-benefit ratio

ITIJ 201, October 2017
Jonathan Bancroft, head of security at Traveller Assist, explains why he thinks cost-cutting efforts by travel insurers are having the opposite effect and are in fact increasing their costs
Over the past 18 months, I have attended a total of eight travel insurance and assistance conferences around the world. One common theme that keeps arising is that travel insurance companies are trying to move towards an in-house assistance model. Trying to understand the thought process and decision making behind this, I have made a point of asking the simple question: ‘why?’.
If the answer was ‘so that insurers can gain more control over their cases’, I would understand it, but more often than not the answer has been ‘to reduce costs’. I understand that the margins are generally slim in travel insurance and that there is a need to reduce costs – but at what cost? 
The problem
It is my opinion, from the evidence I have seen so far, that some companies are trying to do too much, too quickly. Not only is this having a negative effect on the bottom line, but insurers are losing once loyal customers and exposing themselves to litigation. 
A judge in the UK recently found that an insurance company had acted negligently when evidence proved that an employee with no medical training was in fact providing medical advice over the telephone to a traveller in Nicaragua. The employee ‘misdiagnosed’ a rash, fever and nausea, assuring the traveller that she had heat stroke and advising her to try and sleep. The traveller had in fact contracted a flesh-eating disease and was rushed to hospital the following day with septic shock. She required three life-saving surgeries.
This case cost the travel insurer £60,000 in medical bills and assistance fees, and an undisclosed amount in damages paid to the traveller. 
In a second case against an Australian insurer, evidence was presented in a deposition that an employee had referred a traveller to a hospital in Mexico. When the employee was asked why he chose that particular hospital, he said that he had Googled ‘hospitals in Los Cabos’, ‘like I was taught to do’. Unfortunately, this particular hospital has been blacklisted for corruption and poor hygiene, and when it came time for the medical bill to be paid, the hospital did not recognise the insurance company and would not accept their guarantee of payment. Instead, they held the traveller for four days, each day withdrawing the maximum amount allowed on each of his three bank cards.
insurers are losing once loyal customers and exposing themselves to litigation
This case was settled out of court by the travel insurance company for an undisclosed amount. 
While I accept that these are extreme cases and recognise that in both instances the employees of the travel insurers were trying to help, I fear that this trend may be a ‘cost-cutting’ downward spiral for companies who choose to try and become worldwide specialists.
The realisation
It’s impossible for an insurance company, no matter where they are based – be it the UK, Australia or New Zealand – to become specialists in the different regions around the world without investing a substantial amount of money and time. Medical networks take years to build – it’s one of the assets that defines an effective assistance company. But providing assistance is so much more than that. 
From intimate knowledge of the geographical layout of a city, country and region – including routes, elevations and weather patterns – to understanding local laws and cultures; even the dates of public holidays, political rallies and scheduled strikes become key factors to consider, especially during the crucial time of a medical repatriation. 
In Latin America alone, the quality and cost of healthcare differs substantially from hospital to hospital, city to city and country to country. Knowing where, when and why to transfer a patient can save tens of thousands of dollars, and literally mean the difference between life and death.
Efforts by insurers to reduce costs in this way have been counter-productive, ultimately increasing expenses and losing loyal customers.
The solution
As an advocate not just of the traveller, but of ways to improve the assistance industry, ultimately I do believe that travel insurers should have an in-house assistance capability. This should be for the right reasons, and done in the right way, without compromising the quality of care a patient receives. Insurers can gain more control over their own cases while having the capability to predict and control individual case costs, without compromising quality of care.
It’s impossible for an insurance company, no matter where they are based – be it the UK, Australia or New Zealand – to become specialists in the different regions around the world without investing a substantial amount of money and time
Two key factors to consider are: 
People. First and foremost, your people are your first and last line of defence. Hiring the right staff with the right qualifications, experience and language capabilities to answer your calls and emails can mean the difference between success and failure. 
Network. Rather than trying to be all things to all people, insurers who have excelled at bringing their assistance capabilities in-house have created agreements with assistance companies who are specialists in their regions. This strategy is not only cost-effective, but also means that insurers get to retain control of their own cases and be the first point of contact for the customer, which is what they appreciate. Network directors should conduct thorough due diligence of assistance providers to ensure that they can actually do what they say they can do. The decision of who an insurance company partners with should not come down to who the cheapest provider is. Contracts should be signed on merit, with companies who have 24/7 capabilities, can provide immediate referrals to established medical networks, and have the ability to contain costs and issue immediate guarantees of payment.

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