First published in ITIJ 97, February 2009
Travel insurance is too often a low priority as students set off on their worldwide travels, but that represents opportunity for the travel insurance industry. Roger St. Pierre reviews this fast-growing market
Travel broadens the mind – that’s a credo that seems engrained in the student psyche, worldwide. According to a survey of 2,300 young people from Canada, the Czech Republic, Hong Kong, Mexico, Slovenia, South Africa, Sweden and the United Kingdom, over half those polled place travel at the top of their priority list. Commissioned by the International Student Travel Confederation and the Association for Tourism and Leisure Education, the report revealed young independent travellers’ main motivation as being a desire to explore and understand other cultures (83 per cent), followed by excitement (74 per cent) and increasing their knowledge of the world (69 per cent). Though 50 per cent of respondents had an annual income of less than US$5,000, they were clearly prepared to save seriously and/or to work during their wanderings to fund themselves.
Combining travel with study is an increasingly popular method by which young people seek to venture abroad, and one that travel insurers have been quick to service. Says Frank Gillingham, medical director of US company HTH Worldwide: “The potential is huge, with between six and seven million students entering the US alone each year, and nearly two million undergraduate and graduate students studying outside their own countries – around 30 per cent of them in the US – which is the world’s most popular educational destination.
“It’s a highly competitive market, with insurers constantly coming up with innovative ideas to increase their share of business. Some, for example, now offer digital proof of insurance, whereby students can access their insurance details from a digital ID card, through their mobile phone or wireless device to satisfy doctors and hospitals that the patient has cover for their treatment fees.”
Insurers have some key issues to confront, however; most importantly the high risk among students of alcohol and drug abuse, psychological disorders, sexually transmitted diseases, chronic medical conditions and the sometimes-debilitating effects of culture shock. Adds Gillingham: “Alcohol use by students when they travel abroad is affected by such variables as different legal drinking limits, which are often lower than those that apply in their own countries, the feeling that they are ‘on holiday’ which can give full rein to having a good time, and differing drinking cultures.
“This cocktail of factors can lead to disaster, as witness the case of a male student travelling from the US to Madrid, who drank the equivalent of 30 beers during the flight and had to be taken home by his father, without ever having attended a single class in Spain.”
When it comes to writing up their policy clauses, insurers grapple with problems in trying to apply exclusions concerning things like alcohol usage. Gillingham points to a court case concerning a man who jumped from a hotel balcony, aiming for but missing the swimming pool. Although his blood alcohol level had clearly been above the legal limit, thus seemingly invalidating his claim, the court case went in his favour as he had not been arrested and charged and, therefore, could not be deemed legally intoxicated.
"It’s a highly competitive market, with insurers constantly coming up with innovative ideas to increase their share of business."
Adds Gillingham: “Also to be taken into consideration by underwriters are the different legal drinking age laws in various countries and the attitude to so-called soft drugs like cannabis that, for example, are illegal in the US but may legally be used under certain circumstances in the Netherlands and other countries.
“Psychological disorders can also be particularly problematic for insurers. Conditions to consider include anorexia nervosa, bulimia, attention deficit disorder, panic syndrome, manic depression, schizophrenia, personality disorder and culture shock syndrome.
“Another factor to be taken into account is the difficulty sometimes experienced when trying to repatriate an unwell student, given that airlines may refuse to fly a passenger who is not stabilised.”
Since students are frequently seeking adventure, market demand pressures insurers into providing areas of cover for such potentially hazardous activities as bungee jumping, downhill mountain biking, skateboarding and white water rafting, that might be excluded from a standard travel insurance policy. There are other considerations too. Besides covering the above activities, as well as shark cave diving, sky diving, elephant trekking – some 110 specified activities in all – STA Travel includes cover for the repayment of student loans in the event of death or disability, and cover for cancellation caused through the dreaded exam re-sit.
It is not surprising – given the size of the market – that many specialist insurers such as STA have emerged. Typical is the International Student Insurance Services (ISIS) set-up, whose policies have been specially tailored to meet the flexible schedules and limited budgets of young independent travellers. ISIS coverage is available through the International Association for Student Insurance Services (IASIS) as well as from the 5,000 offices in 120 countries of the International Student Travel Confederation (ISTC) that serve some 10 million students and other young independent travellers worldwide.
Serving student travellers for more than half a century, ISTC has blossomed from a concept formulated by student leaders to increase international understanding into a huge global network of the world’s leading student travel organisations. Today, this network of specialist student travel organisations serves the 21st century’s sophisticated young traveller with special flight ticket arrangements on more than 80 airlines around the world, their own globally recognised student identity card and a comprehensive range of surface travel, study and work abroad, adventure and cultural experience programmes.
Also among the specialist insurers to have emerged is World Nomads, whose student travel policies cover a wide range of adventure activities, including skiing, scuba diving and white water rafting. World Nomads provides its policyholders with a free travel journal, and also SMS security alerts to ensure they are well informed and can keep safe during their trip. This organisation’s low-cost premium scales are typical of the market, affording, for example, three months cover to US policyholders for US$158 (£31 in the UK, AU$203 in Australia). To offer its wide variety of insurance packages, World Nomads partners with such insurers as Allianz Australia, Allianz New Zealand, America’s BCS, Arch Capital Group in the UK and International Health Insurance, which is part of the BUPA group.
Whether it’s for a few months travelling around Europe, a year hopping around the world from country to country, or for studies abroad, the UK’s Insure & Go – part of Europ Assistance – has also successfully tapped into the student market, seeing it as a vibrant growth area. Insure & Go’s Atlas Travel and Student Secure policies are underwritten through Lloyd’s of London.
A growing opportunity
Money always rears its ugly head, of course, and the present credit crunch is having an impact on student travel. Typically, many American undergraduates take out a federally guaranteed student loan then top up their financial needs with a private loan from such lenders as Citi-group, Bank of America and JPMorgan Chase. Unfortunately, in recent straightened times, many financial institutions have pulled out of the US$85-billion student loans market because the credit meltdown has meant they are no longer able to package up such loans and sell them on.
Says Joe Belew, president of the Consumer Bankers Association: “Banks are getting out. Part of the reason is that Congress has cut the levels of fees the banks are allowed to levy, making many student loans pretty much unprofitable. At the same time, being unable to securitize the debt, they have been left in the same vulnerable position they faced with mortgage-backed debt.” As an example, Iowa Student Loan, which made 29,000 student loans last year, announced recently that it is stopping private loans altogether.
Fewer loans, means less money for students to finance their travel aspirations.
In tightening their belts and their rucksack straps, young travellers are, unfortunately, too often cutting back on proper insurance coverage, yet many young travellers today are, according to recent research by Britain’s AA Travel Insurance, lugging around an astonishing £1 billion worth of goods and valuables. The average young person’s suitcase today contains around US$600 worth of goods, reflecting the dependence of the present generation on such gadgetry as iPods, Blackberries, mobile phones and digital games.
"The potential is huge, with between six and seven million students entering the US alone each year, and nearly two million undergraduate and graduate students studying outside their own countries – around 30 per cent of them in the US"
An American Express Insurance Services survey of 10,000 student customers revealed that 75 per cent of them regarded their mobile phone as their most essential item when travelling, while 70 per cent said they would not leave the airport without a digital camera to hand.
However, despite carrying all those valuables, most student travellers are on a tight budget and too many of them, says Christian Young, head of AA Travel Insurance, neglect to take out proper cover: “I understand that students today want to stay in touch with their family and friends, and want to have lots of pictures to take home and show them but that only serves to make travel insurance even more crucial to them.”
What is also of great importance is, of course, adequate coverage for medical treatment, personal liability, trip cancellation and interruption. Tom Griffiths, founder of gapyear.com, states: “Our research reveals, astonishingly, that most young travellers spend more time musing over what pen knife to take than they do over taking out a suitable travel insurance policy,” he says, adding, “In fact, many young travellers don’t actually know what travel insurance is or what it does. They see it as an onerous obligation, rather than understanding how valuable it can prove to be when emergencies arise.
“Sadly, there’s a prevalent attitude of invincibility among the young, who tend to think accidents and other bad things happen to other people and not them.”
Fortunately, proof of adequate travel insurance cover is now required when applying for most visas, including the J-1 student visa that secures admission into the US.
Today, a growing number of youngsters participate in the burgeoning global programme of social, cultural, academic and employment exchange schemes abroad, such as the Socrates and Leonardo projects, which facilitate the mobility of more than 100,000 students and other young people within the EU countries each year. Such schemes represent an exciting challenge and opportunity to the travel insurance industry.