First published in ITIJ 95, December 2008
The dream of an idyllic getaway can turn into a nightmare when illness or accident strikes. Fortis Insurance asks what constitutes acceptable limits for medical costs on a travel insurance policy
As international travel increases, so too does the risk to health and safety. Depending on both the traveller and the destination, travellers may encounter sudden and significant changes in altitude, humidity and temperature, which can result in ill health. As they become more confident in their attitude, not only to new locations, but also with regards to dangerous activities, they also risk their safety. This coupled with the fact that natural disasters and incidents are inevitable, travellers may at some point find themselves in a hospital bed or an air ambulance to get home.
The issue is that the bed and hospital in which the travellers find themselves, along with the cost of the treatment required, is often out of their control. Travellers find themselves in situations where they must rely on the medical system of the country they have visited, which may be significantly different in terms of standards of care and amenities to that which they are accustomed to in their home country. Furthermore, travellers are increasingly being sent to private medical practices for treatment rather than public hospitals, significantly increasing treatment costs.
This makes the need for travel insurance compulsory, and in today's world good medical coverage an essential pillar of any travel policy. In fact, medical cover is arguably the most important element of any travel insurance policy, if only because of the cost if something should happen without it. However, the lack of awareness amongst travellers of treatment costs and the fact that relatively minor cases can become very expensive very quickly means that without proper travel insurance they could find themselves insufficiently covered and liable for pricy treatment costs. Let’s look at some examples:
“A young man worked in a US ski resort for four months, then took time off to travel around the US. He allowed his 12-month travel insurance policy to expire just a few days before his departure for home and whilst uninsured was hit by a car while crossing a road and suffered serious head injuries. He was admitted unconscious to intensive care and required highly intensive sophisticated care until he could be flown back to Australia. He was still unconscious and returned on a stretcher. The cost to the family for the medical evacuation alone was $80,000. They have taken out a second mortgage on their house to raise the funds.”
“A British man and his son had only been in Ireland for a matter of hours when he fell down a flight of stairs and as a result of the fall, suffered a broken neck, head injuries and extensive bruising. He has since lost sensation and movement down one half of his body. He had not taken out travel insurance for his trip because he thought the European Health Insurance Card (EHIC) would cover the cost of any treatment he needed. The EHIC covered the cost of the hospital treatment, but he and his family found out too late that it will not cover the cost of repatriation.”
Source: ITIJ September 2008
So, travel insurance that includes cover for medical expenses is essential, as these cases show, but what constitutes acceptable cover?
Doing the sums
According to the Australian Department of Foreign Affairs and Trade, each year it handles 700 hospitalisations, 600 deaths, and 100 evacuations to another location for medical purposes. Daily hospitalisations in South East Asia cost approximately $800, to return a body from Europe to Australia costs typically $10,000, and medical repatriation from the US costs in the region of $75-$95,000 (sometimes up to $300k). Furthermore, over the period of April 2006 to March 2007, 602 Brits were hospitalised in Greece and 1.591 died in Spain. The UK Foreign & Commonwealth Office suggests that to return a traveller home to the UK in an air ambulance from the east coast of the US can cost up to £35,000 and emergency medical treatments such as surgery can cost even more, typically in the region of £75k. A flight, stretcher and doctor escort from Australia to the UK could cost between £15,000 and £20,000.
"in today's world good medical coverage an essential pillar of any travel policy. In fact, medical cover is arguably the most important element of any travel insurance policy"
With the costs associated with medical treatment and repatriation, it is clear that medical expense is the most important aspect of cover in most travel policies. But what levels of medical and repatriation cover are necessary to deem the travel insurance policy worthwhile for the customer?
The Consumers’ Association in the UK recommends travellers should have a minimum level of cover of £1 million for travelling in Europe and £2 million for travelling in the US and the rest of the world. The vast majority of travel insurance policies in the UK provide cover of £2 million or above, although according to UK insurance analyst, Defaqto, cover limits of £5 million to £10 million are meaningless. As the fourth largest travel insurer in the UK insuring over 50 million customers in the last 35 year, Fortis has not (to this date) received a medical claim from a single customer exceeding £500,000. We would therefore agree that limits above £2 million are cosmetic. Typically, £2 million is more than adequate with no less than £1 million cover for UK customers travelling to the US, the most expensive part of the world for medical treatment. Similarly, travel policies for US citizens venturing abroad typically offer medical cover of anywhere between $50,000 to $1 million for travel either within the US or to Europe. The difference here is that many US citizens have some kind of domestic health insurance that will cover them for medical expenses incurred out of the country, so plans tend to be more flexible and varied in their coverage limits to account for any existing cover already held by the traveller.
We can expect to find the medical expenses section of most European, Australian, US and Canadian travel policies covering emergency medical treatment or surgery and repatriation. Typically, they also include returning ashes or the cost of a funeral in the country of death; extra accommodation and travel expenses if a medical condition means the traveller cannot return home on the scheduled date; extra accommodation and travel expenses for someone to stay with the traveller and accompany them on the journey home, if this is recommended by travel advice; and extra expenses for someone to travel out to the patient and return home with them, if this is deemed necessary by medical advice.
In addition, Defaqto questions whether personal accident death and disability benefits are worthwhile in a travel policy or whether they should be considered under term assurance, as typically these limits are relatively small in travel policies. However, for those customers without term assurance, it is essential to have this cover, with limits of up to £25,000 on UK travel policies and $25,000 on US travel policies typically available in the event of death, loss of limb or sight, or permanent disability.
Cover by destination
Cover provided by government initiatives such as the European Health Insurance Card (EHIC) or by credit card insurances should only be treated as complementary cover, not a replacement, to that which a travel insurance policy provides. Unfortunately, these schemes create misconceptions that ultimately fuel underinsurance. ITIJ recently reported that according to a new national poll, most Canadians travelling for leisure do not buy travel insurance when travelling to the US, believing they are sufficiently well protected through their work or credit card insurance. Likewise, a recent survey in the UK found that 11 per cent of Britons had travelled in Europe in the last 12 months without travel insurance because they already had an EHIC: 13 per cent of these respondents mistakenly believed that the EHIC would pay for their repatriation in case of a serious accident requiring evacuation by air ambulance.
As we know, such plans are often not comprehensive, are restricted to certain areas/countries and do not cover private hospitals or air ambulance repatriation. Plus, in some of the countries where the card is accepted, only 70 to 80 per cent of cover towards medical treatment costs may be provided. This does not help a traveller who has taken a day trip to France on an EHIC and is hit by a car and needs to find up to £10,000 to be repatriated home.
"The Consumers’ Association in the UK recommends travellers should have a minimum level of cover of £1 million for travelling in Europe and £2 million for travelling in the US … cover limits of £5 million to £10 million are meaningless."
Currently, the level of cover in force under most travel insurance policies remains the same for all destinations, regardless of the variance in the level of exposure. But that’s not to say that cover cannot and should not be varied. It is possible that single trip travel insurance policies can be tailored to countries rather than regions, depending on the standard of healthcare in that country and the cost of the care. Indeed, at Fortis we are working with one of our major partners to capture information at a country level, mapping claims to the policy cover required. Whilst this presents a complex rating structure, increasingly through Internet distribution and online applications, we can differentiate the rates, whilst at the same time meeting the customer’s specific needs.
Understanding the variation in medical care and costs per destination makes this possible. We know that treatment costs in the US are significantly higher than any other country. We are also seeing the use of private medical practices to treat travellers increasing in countries such as Spain and local to ski resorts. We have access to information on countries where diseases are more common and therefore where the customer is at greater risk. We can also calculate the risk to customers on more adventurous holidays such as climbing holidays in comparison to customers taking a beach break. What we cannot guarantee is that the customer will not travel once they reach that destination, including day trips to other regions within a country or even other countries. This is where a country or region specific policy may fall down and not necessarily meet the needs of those customers.
Ultimately, one of the most expensive and vital areas of travel cover is for repatriation, which is generally covered within the medical expenses section of a travel policy. Acceptable repatriation cover can be defined as ‘transferring the customer by what appropriate means of transport is necessary based on safety and medical necessity’. For example, flying in an economy class seat is not acceptable for a customer with a broken leg in a full length plaster. In any case, the level of cover must extend to cover air ambulance for the worst case scenario.
We are also seeing an increasing tendency for customers to go on activity or trekking holidays with a standard travel policy. Again, however, the level of cover currently depends on the range of activities covered within a standard policy. Search and rescue costs are more likely to be included as part of the medical and repatriation cover in policies related to specialist schemes where customers are travelling with the intent of being involved in activities such as skiing and trekking.
A recent case cost £33k for a search and rescue in Pakistan, but the exposure will vary according to the country visited and whether it is fairly isolated, and the potential requirement for a helicopter and ground workers. Clearly, the costs differ for search and rescue when the search is for a missing person presumed alive (circa. £50k) to a person who has not survived (circa. £5k where it is a case of retrieving the body).
We can continue to debate about appropriate levels of medical cover within a travel policy and how policies should be tailored for customer needs, but what seems to be more important is educating the traveller about their need for appropriate cover in the first place. Customers are not necessarily aware of the benefits of taking out travel insurance and often misconceive the cover they have. What’s more, with the recession knocking at the door, customers may choose to travel uninsured, not stopping to think that the cost of the insurance premium is significantly cheaper than the cost of medical expenses and repatriation, even with minor medical conditions. As with any insurance policy, customers only realise costs when the worst happens. However, with increasing media attention on accidents, natural disasters and spreading diseases, we believe that there will continue to be a growing awareness among consumers for the need to buy travel insurance.
For those customers who do fully understand the need for cover it then becomes possible to educate them about the level of cover they have, how they can take necessary precautions to protect themselves and what to do when they ultimately have a need to call on their policy. A checklist within the policy wording is useful for highlighting the precautions they should take and where they can find more information about the country they are visiting. The checklist can also refer the customer to sources such as local departments of health and government travel advisories.
"Defaqto questions whether personal accident death and disability benefits are worthwhile in a travel policy or whether they should be considered under term assurance"
Other examples include making customers aware of policy exclusions (such as hazardous activities) to ensure that they are aware of the risk to them financially if they have an incident. Equally, ensuring the customer understands the importance of the medical declaration in order that they have appropriate cover for medical treatment in relation to a pre-existing condition is a key consideration. Finally, ensuring the customer is aware of the potential health risks of the country they are travelling to and understands the health precautions is beneficial. The provision of a pre-travel advice service by insurers can provide specific information in this respect.
Ultimately, customers who chose to travel with either no insurance or inappropriate travel insurance and who are either taken ill or injured overseas, are risking far more than a spoilt holiday. They risk significant financial implications for both themselves and their families, which may impact their lives for much longer than their immediate medical emergency.
 UK Foreign Commonwealth Office Annual Report 2008, based on findings from the Institute for Public Policy Research.
 Source: Fortis data
 Defaqto, Travel Insurance May 2008, Adapting to a changing world
 Source: UK Foreign Commonwealth Office
 Insure and Go, June 2008