First published in ITIJ 128, September 2011
As the needs of holidaymakers diversify and tourist profiles change, so the travel insurance industry has adapted its offerings to cater to even the most niche traveller. Milan Korcok examines the plethora of cover available to consumers of every type of holiday – from camel racing to kayaking
A golfer’s dream: a hole in one. And what can make it better than to have your travel insurance company chip in US$250 for the clubhouse celebration? Crazy? Not if you signed up for the golf travel insurance plan offered by one of America’s leading travel insurers. Just pick up your smart phone: dial it up, debit your bank account, pick up your clubs and go. Bonus: you’re British, you might get 300 pounds.
If golf’s not your game and you’re more concerned about your wedding celebration in Bermuda, why not buy a wedding insurance package (starting from as little as £30) that covers damage or loss of wedding gifts, rings, that once-in-a lifetime dress, tuxedo, and those precious photos and video recordings, just in case a hurricane blows through while you’re walking up the aisle.
Concerned about the risks of backpacking in Peru, whitewater rafting in New Zealand, or flexing your muscles in the great outdoors? Travel insurers have you covered, so long as (according to one policy) you stick to canoeing and kayaking (grades one to four), rappelling, spelunking (caving), mountain biking, and tens of other specifically named activities, but avoid American football, boxing, scuba diving below 40 meters, helicopter-skiing or climbing mountains higher than 15,000 feet.
In startling relief to the days when insurers sold bare-bones policies that covered little more than accidents and, maybe, medical coverage to a smattering of intrepid travellers heading into the hinterlands, contemporary travel insurance marketers now regularly roll out ‘new and improved’ benefit packages that promise safety, security, and preservation of assets no matter what their customers choose to do and wherever they go: to the hamlet down the road or the Himalayas.
In an industry growing increasingly competitive, marketers are wrapping their products in seductive messages and dressing them up with all the bells and whistles needed to appeal to any and every subgroup of the population, while also trying to stay one step ahead of competitors offering similar products just a little ‘cheaper’ (the most common adjective used in travel insurance sales brochures and websites), and with no less assurance that their customers can afford to remain ‘carefree’ (the second most common adjective). One scene of a lithe couple gamboling in tropical surf sells the idea of ‘carefree coverage’ more persuasively than any contorted verbiage buried on page 28 of a contract.
contemporary travel insurance marketers now regularly roll out 'new and improved' benefit packages
Travel insurance has evolved steadily and slowly to encompass customers’ bedrock needs for emergency medical cover and evacuation, trip cancellation, interruption and delay, baggage loss, accidental death and dismemberment, emergency legal assistance, corpse return, and other basic needs of travellers caught in alien environments. These components still make up the core of benefits in all travel insurance policies, even the ones targeted to fringe groups.
But selling the same old thing to the same old customers is no way to drum up new business.
Snowbirds, for example, were once considered a niche market. Now there are hundreds of products engineered for ‘boomers’ (an age notch below hard-core ‘seniors’), ‘zoomers’ (one level down from ‘boomers’), sexy seniors (not ready to graduate to walkers), those content to spend the remainder of their ambulatory days on a golf course, and those who are obsessed with scaling Machu Picchu.
Travel insurers are now focusing not only on customers’ ages and income levels, but what they do, where they go, what their interests are, how healthy or infirm they are, and how suggestible they may be to new adventures. Is there a plan somewhere that can cover camel racing or elephant riding? Actually, yes: Essential Travel in the UK has designed its ‘camel and elephant riding insurance with the adventurer in mind’, and there’s no age limit.
The need to entice new buyers has forced marketers to dress up that old bedrock with hot button items that cater to customers attracted by quick, convenient shopping that doesn’t demand a lot of tedious research. Scan 100 travel brochures selling vacations, and at last 80 of them will feature scenes replete with surf, beach balls, palm trees, gleeful children bouncing on the shoulders of idealistically lean and gorgeous parents, or seniors with a twinkle in their eye sipping margaritas in the shade of a coconut tree. Forget the Ovaltine and mittens.
Backpackers, sports enthusiasts, and mountain climbers have long been personae non gratae among travel insurers. But with these groups now accounting for a growing share of international travellers, insurers have become very savvy about recreational activities and exotic sports that most mainstreeters haven’t even heard of.
One TravelGuard UK sports and activities plan lists 332 specific sports activities, and notes which are covered, which are not, which require deductibles, and which require professional supervision or helmets or other safety gear. In this lineup, baseball and cricket are fully covered, so is banana boating (whatever that is). Bridge swinging, however, must be adequately supervised and is subject to a £250 excess (deductible), while tree-top walking is fully covered, and so is fruit picking. But ostrich riding must only be done with professional supervision and is subject to £250 excess; polo is not covered, but mud buggying is. And on and on.
Golf and ski cover have become so popular that they are offered not only by travel insurers as options to their core plans, but as stand-alone items sold individually. American Express UK offers a golf package supplement to cover basic trip cancellation and limited medical benefits, but it also covers loss, damage or theft of equipment, hiring equipment if it is lost, coverage of prepaid green fees if the golfer can’t show up on time, and reimbursement of up to £300 to defray the cost of drinks for the clubhouse in case the player gets a hole in one. The hole-in-one payout has become a standout feature of stand-alone or integrated golf plans. Most also include public liability and medical benefits that would cover a golfer whose ball accidentally hit a bystander or caused other damage.
Ski supplements are even more ostentatiously populated with benefits, especially in UK-based plans. They are expected to cover at least for the presence of snow, but not too much (avalanche cover), equipment, coverage of hired equipment, piste (ski run) closure, bad weather (which may be good for the rest of humanity), or mountaintop evacuation by helicopter (or St Bernards with their welcome casks if the daredevils can’t handle it). Oh yes, don’t forget, one insurer in the UK would like to offer you 10 per cent off the price of an Ellis Brigham ski helmet when you sign up for one of its winter sports holiday packages – or so it offered last ski season.
Ransom and kidnap coverage has, for some time, been a necessary item for companies doing business abroad
Students on spring break have become a major market for American and Canadian tour companies, some of whom prey on the fact that hormone-driven teenagers will go to the ends of the earth in their hunt for sex and booze. Like randy hippopotami in mating season, little will stand in their way. The challenge for travel insurers is to convince these teenagers (or more likely their parents) that they are delving into very risky territory and that they therefore need travel and medical coverage more than most other cohort groups. They are truly innocents abroad, unaware that that their own countries’ laws can’t protect them outside their borders, that crimes against foreigners often go unpunished in their host countries, that foreign hospital personnel may not take too kindly to ‘spoiled rich kids’ absorbing scarce resources they have no way to pay for, unless Mom or Dad come to the rescue.
For travel insurers, covering spring break students is a hard pull because the kids themselves have ‘better’ ways to spend their money, and unless the parents are brought into the sale, too many youngsters will simply go bare – literally as well as figuratively.
How about hot air ballooning? Essential Travel UK, which does cover camel and elephant rides, also covers hot air balloon trips in exotic locales, although it appends this caution: “Whilst hot air ballooning is considered a relatively safe activity, there are still dangers involved. The main risks are hard landings at speed, mid air collisions and hitting power lines.” One tour company pushes this risk factor out a little further by selling hot air ballooning in Egypt. That should be an easy sell for any travel insurer willing to take the risk.
But market segmentation is not limited to accommodating unconventional, bizarre or simply weird tastes – it has become part of the bedrock.
Raising the standard
Ransom and kidnap coverage has, for some time, been a necessary item for companies doing business abroad, freelance journalists and photographers, defence contractors, relief organisations, and those few independent travellers who insist on hiking in Afghanistan or Iraq. Now, ransom and kidnap coverage is working its way into the more conventional, mainstream marketplace.
Terrorism, war, civil uprising, and riot coverage have become de rigeur in most international policies since 9/11, albeit with judiciously articulated (though not always well explained) coverage limits. Some insurers, however, still won’t cover such eventualities for any price. But they have to address it somewhere, not only in their fine print, but in their more cursory summaries too. Customers are asking for it, even if their closest exposure to gunfire is within 50 miles of the Mexican border.
Coverage of pre-existing conditions is always a thorny issue in policies that offer medical cover. Few seasoned travellers are in age groups that can boast perfect health, yet are too numerous to be neglected. Most policies in the US, Canada and the UK claim to cover pre-existing conditions, but they don’t cover them unconditionally. Consequently, more policies are resorting to medical underwriting to allow more people access to their policies on their individual medical merits.
Pre-existing conditions waivers have, however, become common in US trip cancellation policies, most of which have very low medical emergency benefits compared to Canadian and UK policies. These allow customers with pre-existing conditions to waive the standard pre-ex exclusions if they buy their insurance within hours or a few days of paying for trip, so long as their health does not prevent them from travelling. The CSA policy, which exemplifies this waiver trend, says: “The pre-existing condition exclusion is waived provided you meet all of the following requirements: 1) the payment for this plan is received prior to/or within 24 hours of your final payment for your Covered Trip; and 2) you are not disabled from travel at the time you make your plan payment.” Most other plans allow more time to make the payment – some up to 30 days. US trip cancellation policies normally limit their medical cover to $10,000 or $25,000 – not the $5 million or £10 million in Canadian and British policies respectively. US travel medical policies, which have higher limits, eschew this waiver.
‘Cancel for Any Reason’ or ‘Change of Mind’ plan options have also become popular adjuncts in American, and to a lesser extent, Canadian plans. With the increased prevalence of man-made or natural disruption, trips have become far more susceptible to cancellation, delay, or interruption. But trip cancellation and delay plans have always been complicated and studded with exclusions: they often appear to promise more in their promotional materials than they deliver in their fine print and they take up 25 to 40 pages of type to qualify what they cover and what they exclude.
Cancel for any Reason (CFAR) options are intended to circumvent that burden and make it easier for travellers to change their minds about a trip. It’s not that easy though. For example: your child has a sports event at school and you don’t dare miss it; or a crisis arises at work and you don’t want to be seen to be absent; your pet gets sick and you can’t find a minder; no snow at your ski destination; you fall in love and can’t leave your new inamorata. So you cancel in the belief you’ll get back all of your prepaid cash. Not so fast.
Products vary and none will fully reimburse the purchaser unconditionally. A typical CFAR option will cover 75 per cent of prepaid trip costs, so long as the purchaser buys the option shortly after buying his trip (about 14 to 30 days) and doesn’t cancel within two days of departure. Some will cover up to 100 per cent of prepaid costs, but may demand purchase of the CFAR option within 24 hours of trip purchase.
The hole-in-one payout has become a standout feature of stand-alone or integrated golf plans
The CFAR option is also costly, amounting to 40 or 50 per cent of the full premium value. Travel Insured, for example, charges a $186 supplement for CFAR for a two-week trip to France valued at $5,000, by a 50-year old man whose full premium is $381 (7.6 per cent of the trip value).
In Canada, the prices for CFAR options are considerably less than in the US, but the few insurers who have taken them up have placed more restrictions on them. Manulife Financial pays out 75 per cent of the non-refundable portion paid out if the trip is cancelled at least 16 days prior to departure, less if it is cancelled closer to departure: but only up to $500. Travel Guard has a similar ‘Change of Mind’ option, but it pays only up to $400.
The Bounce Back option, also introduced by Manulife in Canada, is a specialty item designed to fit the langorous lifestyles of snowbirds who routinely leave Canada to winter in the southern US. Since Canadian snowbirds make more than 950,000 such trips each year, this is a market that takes some cosseting. Bounce Back covers the beneficiary up to $2,000 to return to their vacation destination if they have been called home because of a death or medical emergency in their immediate family, or some natural disaster causes their residence to become uninhabitable and they have to attend to it. The option will cost the average snowbird about $50.
InRoomMD and Consult a Doctor features are also becoming popular complimentary inclusions in travel insurance policies because they allow, or even encourage, travellers with health concerns to contact specified doctors for advice, information, minor treatment, and prescribed medication before necessarily heading out to hospital emergency rooms whose very touch could run bills for insurers into thousands of dollars. Both InRoomMD and Consult a Doctor are networks of licensed physicians who contract their services to insurers. These features are becoming standard fare.
Concierge services, which promise to help travellers find restaurants, show tickets, ground travel, flowers, and city tours are also complimentary to virtually all holders of travel insurance. Who could resist the Las Vegas Mob Tour, which retraces the steps of the gangsters who founded this ‘paradise in the desert’. Bugsy Siegel is the star of this show. Concierge services may not fit the original mission of aiding travellers stranded in distant lands, but, but woe betide the insurer who neglects to add this convenience to the lineup of benefits.
When, more than a century ago, Henry Ford rolled the first of his Model Ts out to a population feeling restricted by horse and carriage travel, who knew it would lead to the thousands of models available to car buyers today. Who knew that some day, drivers would insist on cars that could park themselves, or that could awaken them if they get too close to a slowing truck?
How soon then, will holes in one, and elephant and ostrich rides, become the bedrock of travel insurance policies worldwide?