In search of harmony and clarity

ITIJ 188 September

Canadian insurance regulators have urged the nation’s travel insurers to help consumers better understand travel health insurance products, assist them with their purchasing decisions, and more equitably meet their fair expectations of coverage. Milan Korcok reports

In an Issue Paper released in July, the Canadian Council of Insurance Regulators (CCIR) Travel Insurance Working Group stressed that at present ‘there is a misalignment between consumer expectations and industry practices’, and emphasised that when travellers’ claims are denied because of misunderstandings about coverage limitations or mistakes on applications, the effect of ensuing media coverage ‘can be detrimental to consumer confidence in the role of travel insurance and the reputation of insurers and industry’. Indeed, it has been.

For years, virtually the only time that travel insurers would make the news was when disgruntled travellers complained that their five or six-figure emergency hospital claims in the US were denied because of ‘small mistakes’ made when completing medical questionnaires, or ‘unintentional’ failures to mention pre-existing conditions thought to be irrelevant. In the past half-decade however, the Travel Health Insurance Association of Canada (THIA) has implemented a robust multi-media and social media campaign to ‘tell the other side of the story’, and it’s paying dividends in industry/media relations. Nevertheless, public perceptions about insurers routinely denying claims and invoking financial hardships on ‘innocent’ customers persist – even if they’re not supported by survey data.
In fact, the Working Group report noted that THIA’s 2015 survey of travel health insurance (THI) claims showed that only two per cent of issued policies generated claims, and only seven per cent of those claims were denied by insurers (see further details of this survey in the sidebar).
Asked about these encouraging results, Alex Bittner, president of THIA, told ITIJ that ‘the industry has always had a sense that the vast majority of claims were paid’: “Now there are two claims reports (one generated by THIA) that provide us with empirical rather than anecdotal evidence to support that conclusion.” Based solely on those results, the Working Group concluded that ‘there is no need for immediate regulatory action to address the issues found within the THI industry’.
Too many words
One over-riding concern repeated throughout the Working Group’s 32-page paper, however, is the sheer complexity of THI products – their lack of standardisation, burdensome legalese or medical jargon, inconsistent definitions and multiplicity of products, many of which are bundled with other covered interests such as trip cancellation and disruption, trip delay, loss of personal property and baggage, individual and multiple-trip coverage. “Considered separately,” stated the report, “THI protections are not excessively complicated, but when offered in bundles they become more complex.” The Working Group noted that some of these ‘bundles’ ran up to more than 80 pages.
Furthermore, almost all individual plans offer several optional levels (basic, general, superior and so on), each involving different exclusions, pre-existing conditions restrictions, and eligibility standards. Consequently, ‘the complexity of the design of some THI products can be an obstacle to the consumer’s ability to fully understand all available options and relevant limitations’.
public perceptions about insurers routinely denying claims and invoking financial hardships on ‘innocent’ customers persist
Pursuing standardisation and clarity
The absence of standardised definitions also makes it hard for consumers to compare and understand products, and this could ‘compromise the consumer’s ability to understand the extent of the coverage of a particular product, thus to make informed decisions’, according to the Working Group.
Developing definitions that would please everybody has been a thankless task for committees charged with their creation. In fact, development of standard definitions for ‘emergency’, ‘pre-existing condition’, ‘treatment’ and ‘stability’ were among the primary reasons for the establishment of THIA in 1998. Different versions have been codified several times since then, but their universal acceptance by member companies has been problematic and spotty.
Even now, such standardised efforts are ongoing within THIA, and Bittner told ITIJ that CCIR’s observations that travel policies and underwriting questions should be made clearer, more standardised and less reliant on medical jargon were valid: “Yes, for sure. I would suggest that every insurer is looking at ways to simplify their applications and policies. The standardisation of several key definitions in the industry (activity now underway at THIA committee level), in conjunction with heightened consumer education, will help everyone.”
Considered separately … THI protections are not excessively complicated, but when offered in bundles they become more complex
Product suitability
Another priority singled out by the Working Group was the travel insurer’s own responsibility in helping consumers to find the most suitable products for their particular circumstances:
“People offering these products, licensed or not, should be trained to recognise the situations mentioned above and act accordingly. At this time, the Working Group notes that exempt sellers do not have training in insurance (except for that provided by the insurer about the exempted product) nor any obligation to know the consumer’s needs or to determine the suitability of the products they are offering.”
Observing that unlicensed individuals who do not qualify for exemptions are distributing travel insurance, the Working Group said that ‘ultimately, it is the responsibility of insurers to ensure that any person who is acting as an insurance intermediary be appropriately licensed or qualified for an exemption’: “They also need to ensure that their distribution channels, including those which make use of exempt sellers, comply with retailing regulations in each jurisdiction they conduct business in.”
At present, THIA’s education committee is nearing completion of a study course dealing with travel insurance licensing issues. It is due to be ready for testing with members this summer or fall.  
“To ensure the fair treatment of consumers, the Working Group believes that a pre-screening/flagging process must be relevant to identify customers who should first speak with a THI expert or undergo a more thorough underwriting process before acquiring a THI product,” said the paper.
it is the responsibility of insurers to ensure that any person who is acting as an insurance intermediary be appropriately licensed or qualified for an exemption
Medical questionnaires
For applicants seeking medically underwritten plans, navigating through several grids of eligibility questions, then more series of ‘yes’ or ‘no’ queries (‘Have you in the past five years been treated, taken medication for, been referred for’, and so on ) are a necessary evil. They represent the only way underwriters can assess an applicant’s health status.
The Working Group noted that one of the most common complaints voiced by consumers, though, was that such questionnaires were often too complicated even for medical experts to understand, yet the importance of accuracy is paramount – the integrity of one’s coverage could depend upon it. Similarly, understanding the scope and significance of policy exclusions is left mainly to consumers, and so the information disclosed should enable them to understand the questions and the importance of providing accurate responses, said the Working Group. 
The dilemma of disclosure 
As the Working Group correctly points out, applicants for travel insurance often don’t see disclosure conditions or even the terms of coverage until after they buy a plan. 
For example: applicant A goes to an agent’s office, or phones, or connects online to an agent who suggests a plan, activates a medical questionnaire with the applicant responding to questions, and then sends a completed copy of the questionnaire, along with a certificate of coverage and policy, to applicant A. Up until this point, applicant A has seen nothing of his contract. He has had no opportunity to survey limitations of coverage, exclusions, disclosure requirements, or penalties for non-disclosure.
The Working Group would like to stand this on its head and enable applicants to see the terms of coverage, exclusions, and main characteristics of a plan – its benefits and exclusions –
before they hand over their credit card, and while they still have an opportunity to compare this to other products. “Disclosure documents should be provided upon the expression of interest by the consumer but before the purchase since these documents are intended to provide consumers with the information that will help them make an informed decision,” said the Group. Certainly not a novel idea when one buys a wall-sized television or a new refrigerator.
[insurance purchasers] need transparency in a scenario clouded by levels of obscurity
The Working Group also believes that applicants have a right to know who is selling them their plan and backing up their coverage: “Some THI programmes administered by third parties place more prominence on the identity of the programme provider or the name of an association … than the insurer. Websites and promotional material of these programme providers give the appearance that the travel insurance is theirs and they are the party responsible for all decisions made under the policy.” One sample policy examined by the Working Group referred to the programme administrator over 60 times, and to the actual insurer only six times.
The Working Group said that it ‘is concerned that policies and promotional material provided through the use of programme administrators can give a misleading representation as to who the consumer has the contract with and who is ultimately responsible for the decisions made under the contract’. The Group clearly asserts that the purchasers need to have this information, and should be aware they have recourse to those parties that assure their product, stand behind it, and have the power to make decisions to resolve a dispute if one arises.
In effect, they need transparency in a scenario clouded by levels of obscurity. 
The Working Group survey was conducted in 2015 and was based on material sent to 241 Canadian insurers focusing on their 10 main products. In total, 33 insurers and financial groups responded, 64 per cent of them offering their products in all provinces.
The survey identified 614 individual and 170 group products, but focused only on the 10 main products listed by each insurer. The findings of the Working Group focused solely on 145 individual insurance and 101 group insurance products that generated about CA$839 million in gross written premiums.
The survey also indicated that more than 12 million individual policies and group insurance certificates were issued for these main products and each policy could grant coverage to one or more persons (insured’s partners or children). The products were offered through credit cards, licensed agents, and travel agents, agencies and other exempt sellers.
The survey also indicated that claims were made on about two per cent of the total number of policies issued, with approximately seven per cent of those claims denied, and approximately 50 per cent of the total premiums paid out in benefits. 
The Working Group concluded that complaints represented less than 0.5 per cent of all claims submitted and that ‘based solely on these results … there is no need for immediate regulatory action to address the issues found within the THI industry’.