Evolving travel insurance

ITIJ 211, August 2018

Travel insurance is constantly adapting to meet the needs of leisure and business travellers, with cover for terror-related events an ongoing priority. ITIJ explores how cover for such incidents has developed and how insurers are striving to meet travellers’ expectations

In December last year, the Institute for Economics and Peace released its fifth sister sledge(GTI) – a report based on data from START’s Global Terrorism Database (GTD) and supplemented with additional data and analysis. According to the GTI report, for the second year in a row, the total number of global deaths caused by terrorism has declined, but 2016 was also the third deadliest year since 2000.​
The report also found that the intensity of global terrorism has decreased, yet it continued to spread to an increasing number of countries. There were 77 countries that experienced at least one death from terrorism in 2016 – more than at any time in the past 17 years, with two out of every three countries experiencing at least one terrorist attack, according to the GTI.
The report also highlighted a positive trend: there were 22-per-cent fewer deaths from terrorism in 2016 since the peak of terror activity in 2014. The GTI attributes this in part to significant declines in terrorism in four of the five countries most impacted by terrorism – Syria, Pakistan, Afghanistan and Nigeria. Collectively, these four countries recorded 33-per-cent fewer deaths according to the GTI.
Perception and reality
The rise and rise of online news and social media means that people are generally much more aware these days of when and where a terror attack occurs, or where civil unrest and riots are happening. US-based assistance company Global Rescue’s 2018 Travel Safety Survey, conducted in January of this year, found that this increase in awareness resulted in terrorism being ranked as the top travel threat in 2018 by 50 per cent of respondents. “Sadly, we don’t feel safe travelling to places of interest, such as Iran, Egypt, Russia. The world we feel comfortable to travel in has shrunk in the past 10-15 years,” noted one survey participant. Another commented: “Globally, we plan to only travel in North America or Western Europe for the foreseeable future due to political, civil, and other significant uncertainties that many countries are struggling with managing.”
One significant challenge is to engage travel underwriters, who are not terrorism or specialty underwriters, to understand and accept this sort of risk
Robin Ingle, Chairman and CEO of Ingle International in Canada, told ITIJ that certainly there is a general fear from travellers in North America about the safety of certain city destinations in Europe, due in part to media reporting of events. He added that it is not, however, a new fear: “Terrorism has long been a concern for trip cancellations and interruption. Unforeseen travel restrictions and the effect the political climate may have on travel are also current concerns. Canadians, for example, often worry about how stricter measures at the US border may affect their trip.”
Despite perceived travel safety issues, nearly all respondents (96 per cent) in the Global Rescue 2018 Travel Safety Survey said that they are likely or very likely to travel in 2018, and these travellers are asking for insurance, according to the industry experts ITIJ spoke to. 
The travelling habits of Americans and Europeans are different, however, and Brits seem to be a bit more adventurous – certainly, travel agents and tour operators are still offering holidays to places like Turkey, and even Tunisia is back on the cards for this year’s holidaymakers. The risk of a terror attack in these destinations is certainly perceived to be higher, but as Kate Huet, Managing Director of International Travel and Healthcare Limited in the UK pointed out, “Terrorism can happen anywhere at any time, it’s not just Tunisia and Turkey that are affected. Barcelona, London, Paris, Nice, Rome, Milan, New York and many other popular destinations for travellers, all are targets, and sadly it’s not the governments or people in authority who are the targets any more – it’s us, normal people, just going about doing what we do. We need to travel prepared and protected, not scared.”
A decade ago, coverage for travellers caught up in a terrorist incident was minimal at best – medical expenses might be covered, but in general, any claims relating to a terrorist incident were excluded. Graeme Trudgill, Executive Director of the British Insurance Brokers Association (BIBA), said: “The travel insurance market and the Foreign & Commonwealth Office are all too aware of the changing security concerns around the world. BIBA, along with our travel scheme underwriters, were one of the first to push for terrorism cover in travel insurance policies; since then, the market has moved on a lot in the last 10 years. Terrorism exclusions still exist but many policies now cover emergency medical treatment and repatriation, as well as many policy wordings automatically extending cover if the customer was stranded overseas following an attack until such time as they are reasonably able to return home.”
Carl Carter, Managing Director of Voyager Insurance Services in the UK, confirmed the company’s clients are now more worried about terrorism affecting their plans than in previous years: “We have seen increased enquiries and demand from both leisure and business travellers seeking out what cover is available in the event of a terrorist event.”
In the US, there has also been an increase in demand from customers, according to James Page, Senior Vice-President and Chief Administrative Officer for AIG Travel. “Customer inquiries related to coverage options for safety and security issues – such as terrorism, economic calamities, geopolitical turmoil and natural disasters – have increased by approximately 20 to 30 per cent,” he told ITIJ. Leisure travellers are definitely more aware today of the potential safety issues that can occur when travelling and, as a result, are seeking not only coverage options, but information and advice to be prepared, added Page: “Rather than opting to refrain from travelling at all, customers are choosing to do their research and be as informed as possible before taking a trip.”
Tangible changes
So, are policies keeping up with the risks faced by customers? Carter says yes: “As a result of change in demand, over the last few years we have continued to increase the scope of cover that is available on many of our leisure and business travel insurance products to provide optional cover for a wider range of terrorism and security-related exposures beyond just medical emergency as an innocent bystander to a terrorist incident, which is what many other standard products in the market would provide, if at all.”
Ingle International has built customisable policies that include trip cancellation and interruption coverage. “These policies help meet the needs of travellers associated with our partner groups or schools that are travelling to potentially affected areas,” said Ingle. "They include ‘change of mind’ benefits for trip cancellation, providing coverage for when a trip is cancelled for a reason other than the specific injured risks listed in the policy.
For AIG Travel too, it is important to let customers decide on the kind of coverage they wish to have, and thus the company has decided to offer both optional and embedded risk coverage. “These added benefits,” said Page, “increase the capability for AIG Travel to respond by not only covering expenses due to a safety or security event, but also efficiently transporting customers from a dangerous situation if required. For example, if travellers are at their destination when a terror event occurs, we offer 24/7 travel assistance services that could include co-ordination of emergency return travel arrangements and flight rebookings.”
Cover for security threats and hoaxes is not available to my knowledge, yet the effect is similar
Huet agrees, and points out that it is not only in the event of an attack taking place that travellers need protection – what about if a threat of an attack affects a traveller’s plans? “It’s much harder to cover threats and hoaxes – but, in fairness, these can have the exact same effect as the ‘real thing’,” she said. “We’ve seen UK airport terminals close and we know the chaos this causes from a perceived threat – travel disruption that lasts for hours and sometimes more than a day, with schedules that go to pot instantly. Cover for security threats and hoaxes is not available to my knowledge, yet the effect is similar.”
The scope of services available to a traveller caught up in a terror attack is what matters, and this can vary widely. Political security evacuation is an option, so if a traveller’s life is at risk as a result of a local situation, they could be evacuated to a place of safety. Other additions to policies have been cover for terrorist disruption, where if a person’s travel arrangements or destination becomes disrupted by a terror event, cover could be provided for cancellation, curtailment, or relocation to a safe location. Carter added: “Service behind a product is just, if not more, important in many situations as the cover provided itself. On our high-risk destination, corporate travel and SME/Employee Benefit travel products, we utilise the services of a specialist assistance company that provides both medical emergency and security assistance services. Many of the assistance staff are ex-military or emergency service personnel with in-country experience in handing and resolving situations in remote, dangerous and hostile environments – it’s not just a multilingual graduate on the phone, it’s someone who has direct training and experience of these situations. They are backed by a global network of in-country security teams that can assist and respond locally.”
Travellers want products and services that are proactive in helping them to avoid getting into problematic situations in the first place, as Robin Ingle points out. He explained: “Our global security networks, online info centre and blog, 24/7 support centre, and our mobile and web application – Travel Navigator – are all designed to proactively keep travellers informed and safe. In addition to global security alerts, as well as access to assistance and medical providers at the touch of a button, Travel Navigator integrates policy details and other important features for a convenient end-to-end solution for travellers.”
Technology is a major game-changer for assistance companies – specialist or not – in terms of their ability to reach out to customers that they know are in a location where an attack has occurred. Geo-location enables companies to keep track of their employees around the world, for example, so they can check in to let their family and colleagues know they are safe. The number of apps available from assistance providers that users can download and press ‘a big red button’ on their screen to alert the company to their need for help is also increasing.
There are two sides to this, said Carter – preventative and live assistance. “On the preventative side, on some products we provide access to downloadable and save-able country information profiles that are regularly updated with advice on the location and situation. On the live assistance side, on our high-risk destination and corporate travel products we include an Emergency App that can be used on a smartphone to give ‘one touch’ contact with the 24/7 medical and security emergency assistance service, plus if enabled by the user, it can transmit your geo-coordinates by SMS and email direct to the assistance service. In addition to this, it gives advice and assistance on how to navigate certain incidents on the ground.”
Corporate travel products have long been ahead of traditional standard leisure travel insurance policies in terms of the coverage and assistance provided in the event of a terror attack. Leisure policies, though, are catching up. Carter said: “Over the last few years, we have already moved many of our leisure products more in line with the protection against terrorist events commonly provided by business policies. In some cases, we have been able to go beyond and give the leisure traveller more than what is provided on most business travel policies. It will be important to ensure that the service provided behind the terrorism cover provides more than just the benefits insured on paper.”
This is certainly a theme among the experts to whom ITIJ spoke for this article. Robin Ingle believes that in the future, insurers will develop products that actually help travellers make informed decisions about risks. He added: “Real-time alerts and pre-travel location warnings for dangers such as terrorism and natural disasters can provide our members with a way to minimise risk, or at the very least be prepared to respond to potential situations that may arise.” 
Page of AIG Travel said that all travellers are different and have their own unique perceptions of risk based on previous travel experiences, the type of activities being undertaken on a trip, destinations travelled, and how regularly they travel to high-risk locations. While a business traveller may have a more inclusive policy at a higher cost, leisure travellers should still have access to a broad spectrum of benefits and be able to pick and choose what level of coverage is needed, based on the trip being planned.
A difficult dilemma
One issue that keeps rearing its head with regards to coverage in insurance policies is that of disinclination to travel. For many years, this has been an industry-standard exclusion, but this is changing. 
UK-based International Travel and Healthcare Limited introduced its Safe Journey travel insurance policy in mid-2016. It includes disinclination to travel, and the company also offers the cover as a sectional inclusion on other policies. Huet said: “Other brokers, who in many ways are our competitors, also link to us so their clients can also benefit from this as a supplementary cover. So, yes, what we started is taking hold and becoming far more accepted and not the exception.”
Allianz Global Assistance USA offers coverage for trip cancellation if a client’s destination has suffered a terror attack in the 30 days prior to departure, and many policies sold in the US offer the same cover. Page said, however, that it is unlikely that trip cancellation due to a traveller being concerned or scared will be included as a default option in travel insurance policies in the future. Again, unique to the US – for the moment at least – are Cancel for Any Reason policies. These, while expensive, can give a traveller the required cover to decide not to travel if they are too worried about an attack happening in their intended destination. Similarly, the ‘change of mind’ benefits mentioned earlier by Robin Ingle will probably be more widely available across the marketplace as well.
However, determining coverage, even if it’s there on paper, is not always straightforward. It can sometimes take time for the authorities to deem an event ‘a terror attack’, and if the event occurs just days before a person is due to travel, then the insurer will have to take the decision on whether or not it will count as an insured peril. Carter pointed out: “In addition to this, in relation to a terrorist event, for an underwriter there is a big concern about the possibility of an aggregation of insured exposure. Not so much in relation to, say, a localised terrorist event in resort, but more so on the larger macro scale if a terrorist event closed down a major airport, seaport or disabled the channel tunnel for a period of time.”
While it can be difficult for an insurer to find an underwriter with whom to partner when it comes to covering claims related to terrorism, there is no doubt that those at the forefront of the market are doing their utmost to meet the needs of today’s traveller. Kate Huet commented: “One significant challenge is to engage travel underwriters, who are not terrorism or specialty underwriters, to understand and accept this sort of risk. Any policy that has to have sections that are carried by different insurers adds significantly to administration requirements – this means more cost, time and that’s not an attractive proposition for anyone.” Anyone trying to bring this sort of product to the market, she added, will need a lot of determination, perseverance and deep pockets. ■