Cruising cover

ITIJ 200, September 2017

Travellers embarking on cruise holidays present a broad set of risks. Mandy Langfield looks at how the insurance industry has developed unique products for this niche travelling population.

Cruise Lines International Association (CLIA), the trade body representing the cruise industry, said in January 2017 that the sector is ‘growing at an incredible pace and on a global scale’. And cruising is no longer just the domain of older travellers, as CLIA's president and CEO Cindy D’Aoust said: “While there is a wealth of findings in the 2017 Cruise Travel Report, one that stands out is that the cruise industry has been successful in engaging younger generations.” 
ITIJ spoke to Steven Benna, marketing specialist for US-based insurance comparison site Squaremouth, about what the company has experienced with regards to cruise insurance. He told us: “We’ve seen a steady increase in interest from travellers looking for insurance specifically for a cruise over the past few years. The percentage of total policies purchased using our ‘cruise’ filter has increased each year since 2012.”
In the UK, International Travel & Healthcare Limited (ITHC) has been providing cruise-specific travel insurance since 2009, which it started in response to growing demand from travellers over the age of 75 who were finding it increasingly difficult to obtain appropriate cover. Kate Huet, managing director of the company, explained: “The cruise industry was seeing a decline in their most stalwart and loyal clients, because insurance was becoming impossible to acquire.”
Scott Adamski, senior vice-president of sales for AIG Travel in the US, noted that ‘while a cruise-specific product is not readily available from third-party travel insurance providers, most providers offer a robust set of travel insurance coverages that will provide trip protection for cruise travellers’. He added: “Cruises are one of the most common trips travellers seek coverage for, and I expect there to be even greater demand in the coming years as the industry continues to grow and awareness of the variety of insurance products available to travellers also grows in the US. Travellers booking emerging specialty cruise types, such as river cruises, long-term cruises and weight-loss cruises, may have unique needs – travel insurers are certainly paying attention to these trends, and will evolve their offerings, as needed, to accommodate.”
We’ve seen a steady increase in interest from travellers looking for insurance specifically for a cruise over the past few years
Comprehensive coverage
First of all, why should consumers pick a cruise-specific policy over standard travel insurance cover? Different risks mean different cover is needed, and policies that are designed with cruises in mind will have more comprehensive cover that meets the needs of those travellers. GoCompare in the UK pointed out that cruise policies will take into account the fact that medical expenses are potentially greater at sea than on land, as well as the fact that some insurers will even waive the excess for any medical treatment needed while a passenger is on board. 
Adamski of AIG Travel added: “Cruises are often multi-leg – many travellers drive or fly to a port, and then embark on their cruise from there, making several stops throughout their trip. With all these transportation modes and destinations, there are a lot of variables, and opportunities for one of those variables to result in a traveller needing to file a claim.” 
Are you coveredNew research from Defaqto in the UK served to highlight the importance of travel insurance that is designed for cruise passengers. According to the company, around half of all the travel policies (455 single trip and 441 annual travel policies) will cover travellers on a cruise, but only if the customer states they are going on a cruise, and pays an additional premium. More worryingly, 117 (13 per cent) single trip and 105 (12 per cent) annual policies will never cover a customer on a cruise holiday. Furthermore, holidaymakerswho find themselves confined to their cabin under doctor’s orders during a cruise run the risk of missing out on more than the odd excursion and a few days of sun. Less than two-fifths of single trip (39 per cent) and annual (37 per cent) policies provide compensation benefits in the event of cabin confinement, and those that do would protect for considerably less than the cost of a cruise. The average maximum amount of money an insurer will pay out in the event of cabin confinement is £540 on a single trip, and £545 on an annual policy.
InsureMyTrip, a US-based travel insurance comparison site, recently completed its 2017 cruise survey, which reinforced reasons why specialist cruise travel insurance is a must. According to the findings of the survey, which interviewed 568 people who had all researched or purchased travel insurance in the past two years, cruisers are more concerned about an illness or injury affecting their trip than they are about weather or terrorism. Forty-nine per cent of those polled said they were most concerned about themselves or a family member becoming ill or being injured.
Another major player in the US travel insurance market, Allianz Global Assistance (AGA) USA, completed a cruise industry survey in March 2017. According to the findings of that survey, 59.2 per cent of Americans believe their cruise line would be equipped to handle serious medical emergencies, when the reality is that in most cases, passengers will be taken off the ship and transported to the nearest medical facility. Daniel Durazo of AGA USA pointed out that travel insurance is a must-have for these situations: “Often, local medical facilities may not be equipped to handle major medical problems and some cruisers may need to be evacuated by air ambulance to the US for treatment." Now, ITIJ readers are well aware of the costs such an evacuation could incur, but sadly, consumers are not – according to the survey, 56 per cent believed that an air ambulance from Mexico or the Caribbean back to the US would cost less than US$20,000. If only!
The CLIA report also highlighted why cancellation cover is especially important for cruise passengers: “The vast majority of cruisers plan a trip between four and 18 months prior to departure, as opposed to half of non-cruisers who book land-based vacations less than three months before.” With that length of time between booking and travelling, having cancellation cover is vital. 
The fact that cruises tend to be more expensive than an average holiday is also a factor that encourages travellers to buy insurance, said Adamski, as it allows them to travel with peace of mind. AGA USA's Daniel Durazo concurred that cash is a factor: “Cruising is a significant investment, and getting travel insurance before a cruise is of equal or more importance than with other types of trips.”
holidaymakers who find themselves confined to their cabin under doctor’s orders during a cruise run the risk of missing out on more than the odd excursion
Needs must
The travel insurers ITIJ spoke to broadly agree that it should be a requirement of booking a cruise that customers buy comprehensive travel insurance. But cruise lines don’t always make travel insurance a necessity. Carnival, Royal Caribbean, Disney and MSC Cruises all offer their own cruise insurance packages, for example, but it is not a necessity of travel with these companies to have such cover in place, even if some ‘strongly recommend’ it. Norwegian Cruise Line, headquartered in the US, does, however, insist on cancellation and medical cover as a prerequisite for travel. Similarly, Cunard in the UK insists on a minimum of £2 million worth of cover for medical and repatriation costs, and P&O Cruises, also in the UK, requires passengers cover all pre-existing medical conditions, emergency evacuation from the ship, shore hospital medical costs and repatriation, with a minimum of £2 million of coverage.  
Kate Huet told ITIJ that having travel insurance should be a prerequisite for clients booking cruises, as ‘the cruise companies don’t want the liability of having uninsured passengers’. “However,” she continued, “while they state ‘adequate’ insurance is required, they are not checking that the client has covered all of their pre-existing health conditions – and that becomes a problem for the insurer further down the line.”
InsureMyTrip’s statistics show that Carnival Cruise Lines was the most popular on the market based on purchases made so far in 2017, followed by Royal Caribbean, Norwegian and Celebrity.
Benna of Squaremouth said: “To our knowledge, it is not a requirement to have travel medical insurance in order to book a cruise. However, we do recommend it in certain situations, especially for cruisers travelling out of their home country where their health insurance will not cover them (for example, cruisers on Medicare).”
Cruising coverAvailability of cruise-specific travel insurance policies has seen a dramatic increase in line with the popularity of such holidays, although insurers might be disappointed by the level of consumer awareness of this type of protection. InsureMyTrip’s findings highlighted the fact that consumer misunderstandings about the need for travel insurance remain concerning. Over 36 per cent of those polled were not sure whether their domestic health insurance plan would cover any doctor or hospital visits while travelling out of the country. Thirty-five per cent were confident that their domestic health insurance would cover them for out-of-country healthcare costs, while 28 per cent said their plan would offer them no coverage.
Glen Smith, chief executive of UK-based Avanti Insurance, said that in the past couple of years, the company has recognised the importance of the cruise market, which has prompted it to develop three single-trip and two multi-trip cruise specific products. He went on to explain: “As we all know, a claim off of a ship in the Caribbean can be huge and so it’s important, especially with a brand such as ours which tends to specialise in older travellers, to be able to ringfence this risk. In addition, customers are seeking enhanced benefits such as a higher level of cancellation cover and cabin confinement benefits.”
Frequent readers of ITIJ will be well aware of the expensive nature of medical bills from cruise ship medical facilities. Industry fables of insurers being charged hundreds of euros for saline drips and similar amounts for simple anti-sickness pills are (stomach)-upsettingly common. Benna of Squaremouth said: “Due to the cost of medical expenses on a cruise, we recommend cruisers purchase a policy with at least $100,000 in emergency medical coverage. Likewise, a medical evacuation can be a significant expense, especially in a remote cruise destination. For this reason, we recommend $250,000 in medical evacuation coverage.”
Onboard medical expenses, said Huet of ITHC, are ‘in line with the US’; it is essentially a captive market – private medical care without the benefit of the opportunity for cost containment. However, it’s not medical claims onboard ships that are actually of major concern to insurance providers according to Smith, who said there is not a greater propensity for customers to claim on cruise policies, ‘just a potential higher claims value’. The most common claims Avanti receives are for cancellation, along with trips and falls that lead to fractures. 
The average cost of a cruise holiday being more expensive than a typical beach holiday means that cancellation claims will inevitably cost more. “The claims loss ratios can be huge,” said Huet. “The risks are high, and it’s not just cancellation claims that represent the volume, but the sheer value of medical expenses claims too.” Medical claims that might be relatively straightforward for many travellers are made more complex and expensive by the nature of the traveller – many cruise passengers are in the older age demographic, and ITIJ readers are well aware that injuries such as breaks and fractures become more complicated to treat in later life.
Cancellation claims were also noted by Adamski as being the most common claims filed by cruise travellers, along with claims for benefits under the trip interruption part of the policy. “The second most common claim,” he added, “is medical expense and medical evacuation.” Other benefits that are not exclusive to cruise insurance, though, remain important for many travellers. “There are also other services with a comprehensive plan that cruise travellers may have access to without ever needing to file a claim, such as security assistance and concierge services,” Adamski pointed out. “Through the former, travellers may benefit from access to updates on evolving security situations around the world (which, depending on the destination, may be critical).”
The InsureMyTrip survey found that 25 per cent of respondents had filed a claim on their travel insurance. The most common reasons for filing a claim were given as medical care required during a cruise; a medical issue forcing trip cancellation; bad weather forcing delay or cancellation of a cruise; a missed flight leading to a delay or cancellation of a cruise; and items were stolen or lost during a trip. “Our internal data also suggests that cruisers are also interested in travel insurance products that are geared specifically for their needs. We anticipate this buying trend will continue,” said InsureMyTrip product director Lynne Peters.
Much is made in the media of norovirus outbreaks on cruise ships causing misery, and according to the US Centers for Disease Control and Prevention, reports from some cruise lines last year showed an incidence rate of as many as 30 per cent of passengers suffering from norovirus. Kate Huet challenges this assertion, though, saying she has never seen a claim for norovirus from a cruise passenger. Instead, she says, gastroenteritis claims are common. “Years ago,” she continued, “I didn’t even see these because the cruise companies ‘over compensated’ while onboard and those who were affected were offered free cruises in replacement. That’s not the case any more.” 
Challenge accepted
It seems that, in general, the travel insurance industry has responded well to the challenge of providing a complex product to those who need it. Increased limits, extended cover for cancellation and consequential loss as a result of cabin confinement, missed port of call insurance – all of these added extras mean that the policies on offer are, broadly speaking, more than fit for purpose and are fulfilling the needs of travellers around the world. And while the loss ratios can be significant, with the correct underwriting, screening, risk rating and pricing, the industry can shoulder the burden of care without compromising its bottom line. 

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