The wording of insurance policies should be such that it is possible to strike a balance between offering protection to the insured person and protecting the insurance company from excessive claims. The balance may be difficult to find, but there are strategies to implement to get to an equilibrium.
The value of insurance lies in customer support
Policy wording, of course, needs to do more than just state monetary coverage facts and figures. The true value of a travel insurance policy comes in the small print about all the other services the policy offers. Stephane Baj, Zurich’s Head of A&H UK and Multinational, highlights that as the industry emerges from almost two years of near total disruption to business travel, it is ever more important to focus on value for money and achieving the best possible outcomes for the clients. “Business travel cover is not just about the insurance element. Large carriers also offer additional assistance to help companies define their own travel policies and procedures and mitigate risks,” he says. “During the pandemic, many large insurers were in contact with customers daily, helping them to understand the losses they may face, the changing risks their travellers could encounter, what they could do to mitigate them, and how their policies responded. We should not underestimate the value of this in both helping to protect the insured and protect the insurance company from excessive claims.”
Like many other companies, during the pandemic, Zurich saw areas for improvement, and acted upon them
According to Baj, it is also important to ensure that insurance helps companies to meet their obligations to protect employees and support those responsible for travel, and the wording of policies must not overpromise – it should be honest in its capabilities and be capable of keeping those promises.
“In this vein, the pandemic has been a unique opportunity for the market to demonstrate its commitment to corporate clients and to test how its products meet the challenges of the day. While over the past several years market competition has put pressure on rates, rather than paying a low price for an unhelpful insurance policy, it makes more sense to offer companies and their employees’ coverage that fully protects them,” he says. “Our product covers all possible cases of serious disruption to international travel that may occur suddenly and unexpectedly, thus fulfilling its purpose of insuring business travel and supporting companies.”
Like many other companies, during the pandemic, Zurich saw areas for improvement, and acted upon them: “We have extended the capital payment guarantee in the event of death while travelling to all cases of heart attack or stroke, which is relatively unique,” explained Baj. “It is normal that this cover is provided in the case of a road accident or a fall down the stairs, for example, but not in the case of a heart attack or stroke. We have also made sure that our product covers any medical, security or material harm caused by the pandemic or any other major travel disruption.”
Appropriate and affordable travel insurance cover
Finding a balance between offering ‘appropriate and affordable’ protection and the insurer risk appetite depends on several factors, according to Mark Allsopp, Head of Travel at Taurus Insurance, who points out that in the UK, the market it is complicated by its own competitiveness, where over many years the product has had to evolve to remain relevant within a multitude of new and established distribution channels available to the consumer. He told ITIJ: “Policies therefore are predominantly based on a list of defined Insured Perils basis in the UK that in the main are common across the market, although there are some exceptions.”
A customer may want a policy that covers all risks with little or no exclusions, according to Allsopp, ‘but the reality of market dynamics means that the product available is designed to meet a well-established market ‘norm’ where the broadest cover is afforded by insurers and distributors considering the price the insured is prepared to pay and the competitiveness of the market’, he affirms.
US healthcare costs need specific wording
According to Jason Davis, Senior Vice-President at cost containment provider The Phia Group, the US also requires special consideration for international travel insurance providers with exposure there, because many ‘out of network’ providers have sky-high charges and billing practices, which can expose a well-intentioned travel insurer to unreasonable costs. “This is a tricky situation for travel insurers when it comes to policy language,” Davis told ITIJ. “On one hand, they want to be protected from unreasonable costs, but, on the other hand, they do not want the unreasonable costs to be shifted to the consumer,” he says. “The prevailing travel insurance industry position has been to keep language broad to cover the member and try to contain unreasonable costs to the extent possible, which is a challenge when the language itself essentially covers unreasonable costs; or, stated differently, does not exclude unreasonable costs as a benefit.”
Americans do not play the coverage or ransom game with their providers, affirms Davis. “They limit reimbursement to a reasonable amount, and, in addition, the good payers (with help from a partner) work with the member to ensure they are also protected from the unreasonable balance.
"It is worth noting, however, that not all American payers have historically not paid reasonable amounts and not protected their members from abusive out of network claims. The result has been a major cost shift to the members and, sadly, many American families have been harmed financially as a result."
Provider networks, cost management and solid underwriting
Historically, US hospital bills have been expensive as they are privately run ‘for-profit’ organisations, unlike the state-funded health systems of most European countries. “Insurers rightly spend time and resources on ensuring they establish a network of providers or utilise existing networks to ensure patient care is at the forefront and the correct medical facilities are utilised for the case in question,” says Allsopp. “The impact here benefits both the insurer and the insured in establishing cost efficiencies and appropriate patient care.”
It is fundamental when you have customers going to the US on holiday to have strong underwriting practices and solid market knowledge. Stephan Baj added: “At the heart of this, it is important to have a medical administration framework that grants access to expert healthcare management and cost containment and preferred medical provider networks. The key is to have the ability to get employees to be locally treated in hospital at costs which are available to US insureds and insurers,” he says. “As others do, Zurich has a both a strong local travel insurance presence in North America and international healthcare experience knowledge, both directly through Zurich North America and via our own international medical assistance networks.”
The situation is similar in other regions of the world where travellers are normally referred to private medical care, where costs quickly spiral. “For instance, that would be particularly true in Hong Kong, Brazil and in some European capital cities,” pointed out Baj “Again, that is the type of assurance of capability and stability which an international travel insurance carrier of global stature and reputation can bring.”
Financial regulation and travel insurance product design
Financial ombudsman services in many countries are tasked with deciding whether or not policy wording was fair and clear cut in the event of a claim denial. And insurers and distributors pay very close attention to Ombudsman’s judgements made in determining future product evolution, states Allsopp. “Similarly,” he says, “we pay close attention to the stance of our regulator(s) in product evolution. In addition to Ombudsman and regulator feedback, we also ensure claims analysis, and claims and sales complaints are reviewed to ensure we have a full customer experience view on product adequacy and evolution.”
The US government recently stepped in to address the issue of unreasonable balance billing with the No Surprises Act, which fundamentally makes it illegal for providers to balance bill consumers on certain surprise claims, observes Davis. “The US government has declared that out of network balance billing is completely run amuck and needs to be regulated to protect consumers – both in the form of balance billing and in higher premiums,” he says. “Providers and insurers must now work together to settle certain out of network claims. The prevailing benchmark is the payer’s median contracted rate for the same or similar services, which can be considered the ‘reasonable value’ of services and most certainly not charges.”
If a provider disputes an insurer’s payment, the claim can either be negotiated by the parties or resolved by a third-party arbiter who is expressly instructed not to consider billed charges in its ruling, affirms Davis. “If charges are now summarily dismissed on surprise bills (of which most are emergencies) by the American government, why does the travel industry persist in covering usual and customary charges?” he concludes.
Whether or not the No Surprises Act will give international travel insurers increased bargaining power or more exposure to hospital bills has yet to be seen – test cases in the first few months of this year will be under close scrutiny, that’s for sure. The good news, though, is that the experts seem to be in agreement that there is chance to optimise policy wording when it comes to exposure to US hospital bills. There is an opportunity here, and insurers would be remiss if there weren’t to grab it with both hands. Covid might have left travel insurers under pressure with cancellation claims, but it also showed what customers want from their travel insurance policies. Companies are being given clear instructions from regulators, ombudsmen, and, indeed, the customers themselves, to ensure their policy wording meets the needs of their customer base.