Insurance industry bodies are collaborating with travel insurers to improve public perception of a complex product set. Anthony Harrington looks at how this is working in practice
It is often pointed out with regret by specialist travel insurers that theirs is a product set that people find easy to buy and next to impossible to follow. Travel insurance tends to be a last-minute add-on to a holiday booking and few who buy it stop to consider just how large the pay-out could be in a worst-case scenario – or to ponder the exclusion clauses that such policies, by their very nature, include in the small print.
Travel insurers are well aware of the fact that when they offer something like a £10-million limit on health cover as part of a travel insurance policy, there is a small chance that somewhere down the line that limit may well be tested for real. All it takes is for one traveller in tens of thousands to have a life-changing accident abroad, and the travel insurance provider will need to call on their reserves from the profits from a huge number of policy sales in order to settle the bills. Not surprisingly, then, travel insurers have to qualify the deal they are making with the customer. However, travellers tend to buy travel insurance without really believing that they will ever have to call upon the policy for anything more serious than a lost suitcase or a delayed flight, so often pay very little attention to the conditions, and exclusions, set out in their contract.
This ‘gap’ in the travelling public’s perception of the product is something that various insurance professional bodies and associations around the world are well aware of. It is one of a number of issues that professional bodies have addressed and continue to address on behalf of their travel insurance members. Other issues addressed by the professional bodies include unfair competition and/or damaging practices by some ‘fringe’ providers. They also liaise with the regulators on behalf of travel insurance providers.
Working with regulators
Will McAleer, past President of the Travel Health Insurance Association of Canada
(THiA) and President of Canada-based World Travel Protection
, points out that THiA has a history of collaborating with regulators and other industry associations. “Whether it be in setting annual regulatory agendas, working with regulatory travel insurance working groups (like the CCIR – Canadian Council of Insurance Regulators) or related to data collection processes between member insurers and regulators, THiA takes the time to liaise with all parties to ensure clear lines of communication. Beyond this, THiA also works proactively with provincial regulators in Canada by meeting with them on issues our members find of interest,” he said.
THiA’s main focus over the past few years has been on its relationship with the CCIR travel insurance working group. “Our process is to keep in touch regularly with regional regulators to ensure that there are clean lines of communication and to ensure that we provide thoughts on upcoming legislative initiatives,” McAleer told ITIJ. THiA is interested both in legislative initiatives and in consumer-based activities that will help it and its members deliver on their commitments to the regulators. As always, these commitments have to do with ensuring that the travel insurance products offered by members are fair and reasonably clear.
THiA is interested both in legislative initiatives and in consumer-based activities that will help it and its members deliver on their commitments to the regulators
“Recently, for instance, we have proposed several items to help raise the confidence of travellers in the travel insurance products they purchase,” said McAleer, “We launched the Travel Insurance Bill of Rights and Responsibilities (BORR) as part of an effort to meet this need.”
McAleer explained that the Bill outlines the rights insured persons have when purchasing a policy, but it also seeks to be clear on the insured’s responsibilities, particularly the need to divulge existing medical conditions and to observe the exclusions stipulated in the policy.
If the policy excludes bungie jumping, for example, which is a very common exclusion with travel insurance policies, it is very important that the insured realises that going bungie jumping will take them into territory that the policy does not cover. A spinal injury incurred as a result of leaping from a bridge over a gorge with a rubber band attached to their ankle could therefore be life changing both in terms of the individual’s physical capabilities and their financial health.
If bungie jumping was a spur of the moment thing and not the main purpose of the holiday, the chances are that the insured will not even have read the bit in the policy that specifically excludes this activity from cover. The same goes for scuba diving and half a dozen other ‘dangerous’ activities that many travel insurers routinely exclude from the cover they provide. This form of customer education, then, is one of the key items that industry bodies and travel insurers have on their agenda.
The professional insurance bodies, insofar as they have travel insurers as members, tend to see it as at least in part their responsibility to educate the public in some of the basics surrounding travel insurance. They do this in consultation with travel insurers, but the campaigns generally run on the professional body’s website as well as in whatever media the professional body can reach. Charlie Campbell, Senior Policy Advisor at the UK-based Association of British Insurers
(ABI), which represents about 70 per cent of the UK insurance market, points out that the ABI does a great deal of advocacy work with the general public on behalf of its travel insurer members. Its most recent initiative has been to come up with a way of solving the problem that large numbers of people today book their holidays online and don’t go anywhere near travel agents – online purchasing of holidays, in effect, negates any of the explanations that travel agents generally provide concerning travel insurance. While travel agents in the UK can’t give product advice, since that is limited to regulated financial advisors, they can remind travellers of the basics, such as the need to read policy exclusion clauses and accurately answer questions about pre-existing medical conditions.
The ABI has tried to address this, Campbell points out, by introducing cartoon-style animated explanations of the key points around travel insurance on its website. “Travel policies tend to be bought on price alone, without much attention being paid by the purchaser as to whether the policy is appropriate or even covers the country they are travelling to,” he said.
Campbell adds that it is a difficult product, even for industry professionals: “There are continuing debates about how to view travel insurance. Is it a medical insurance product, with add-ons like flight cancellation clauses, or is it an all-encompassing product designed to pay out for every possible thing that can go wrong when you are travelling?” What the ABI has tried to do for its members and for the public, he explained, is to produce light-hearted, simple, engaging cartoon content to try to provoke more understanding of and interest in travel insurance products.
Dealing with pre-exes
The various national regulators that oversee their general insurance industries are an entity that need to be considered in their own right. In the UK, for example, the Financial Conduct Authority (FCA) is currently looking into whether the insurance industry is being fair to people who are medically disadvantaged, including people suffering from cancer. The FCA has launched a consultation on this very issue and it remains to be seen what the outcome will be.
Of course, people with cancer are subject to the same risks as every other traveller, so penalising them seems harsh – if you are not a travel insurance provider. If you are, as Julie Remmington, a consultant who sits on the ABI’s travel insurance committee, points out, you will be only too aware of how difficult it is to recover from a high-value claim from such a traveller that relates to their condition.
It follows that anything that skews the probabilities towards a massive claim is, to put it mildly, very disconcerting for the industry. Travel insurers want to pay out on legitimate claims, but the plain fact is that their business model can’t stand multiple, multi-million-dollar payouts to insured persons – not if the travel insurance provider wants to stay in business. As Remmington notes, there is a huge disparity between the cost of a travel insurance policy and the amount at stake for the provider. “If you have a UK traveller who has a heart attack in the US, the claim could be for hundreds of thousands of pounds. You have to sell a huge number of travel insurance policies just to break even from a single such loss,” she points out. So, the professional bodies will push back – in the nicest way – on behalf of their travel insurance members, against regulatory pressure to have some kind of open access policy to travel insurance for those with chronic medical conditions.
the ABI does a great deal of advocacy work with the general public on behalf of its travel insurer members
Do away with exclusion clauses and no provider could afford to stay in the travel insurance game for long, and that would be detrimental to all travellers. Whether there is an actuarial solution capable of producing a viable business model for high-risk travellers is an interesting mathematical problem for someone to solve, but on the face of it one has to doubt that such a solution exists.
For a start, Remmington points out that already the industry has seen some high-profile withdrawals from the travel insurance game. “For a number of providers, travel insurance is accepted as an unprofitable business line that nevertheless has value because of its potential to introduce the purchaser to the brand, and so to other insurance lines, such as household, motor and life insurance,” she commented. It is seen as brand enhancing even as it takes a chunk of profit out of the bottom line. “The industry is struggling with the fact that travel insurance policies are cheaper today than they were 15 years ago, while medical costs have soared over the same period. This is a very hard circle for the industry to square.”
Graeme Trudgill, Executive Director at the British Insurance Broker’s Association
(BIBA), gave ITIJ
his take on assisting customers with pre-existing medical conditions to find adequate and affordable cover: “As a UK trade body, we work with relevant UK brokers and insurers to improve access to travel insurance in the UK for people with medical conditions. We believe our Find-A-Broker service has a role to play here, as it did with the BIBA/ABI/Government agreement on age and insurance,” he commented. This latter agreement, launched in 2012, helped signpost more than one-quarter of a million older holidaymakers to a specialist travel insurance broker with a track record in helping where the client had been unable to source cover elsewhere.
“Collaborative projects like this can really make a difference to people who otherwise risk travelling uninsured or not going on holiday at all. We are sure we can do something similar to this in the travel medical condition sector. We are talking with the FCA and relevant stakeholders about how we can help,” Trudgill said.
BIBA also partnered with Lloyd’s Syndicate DTW1991 to deliver a lecture in Lloyd’s Old Library this year to talk about the many evolving issues and areas of collaboration in travel insurance. “Travel insurance is continually in the media – whether it is following a hurricane, the financial failure of an airline, volcanic activity or terrorism. Issues like access to insurance for older people and those with medical conditions also create concern. So it is important that we have a mutual understanding of the market and the approach taken by insurers,” Trudgill concluded. ■