Many people planning a trip mistakenly believe that travel insurance is a simple product, but those active in the sector know differently. Holidaymakers and travellers may bemoan the cost of travel cover (despite some very low prices) complaining in the same way as a driver, who states their motor insurance costs more than the value of their car – that their holiday costs only a couple of hundred pounds. In both examples, the value of the insurance is only appreciated when the policyholder suffers an accident –a motor insurance customer injuring a pedestrian resulting in thousands of pounds compensation or a travel policyholder needing expensive medical evacuation to the UK.
In fact, the biggest cause of travel claims is for medical expenses. According to the Association of British Insurers (ABI) Key Facts 2021 publication, the sums paid out are significant. (https://www.abi.org.uk/globalassets/files/publications/public/key-facts/abi_key_facts_2021.pdf)
“In 2019, travel insurers paid 471,000 claims worth a total of £377 million to travellers who needed help whilst they were abroad. £197 million was to cover the cost of emergency medical treatment and £141 million for cancellation.” The publication also states: “The average travel insurers pay out to help people who need medical treatment abroad is £540K per day.” More than £500,000 per day for medical treatment is sobering – these are big sums that all but the very well off would be able to fund themselves if they fell ill or suffered an accident abroad.
Distribution of travel insurance in the UK
Historically, and particularly in the package holiday travel market, the insurance bundle was simply added to the cost of the trip. It was seamless. However, since 2008 their insurance distribution activity became regulated by the same regulator as the insurance sector – then the Financial Services Authority, now the Financial Conduct Authority (FCA) – adding a new burden on the practice. Regulation governs which firms can and cannot give advice and travel agents are only able to offer a ‘non-advised sale’, usually to an insurer they are affiliated with. They cannot offer their customer advice or choice. However, it is a simple option for their customers.
Banks too often offer discounted or ‘free’ cover bundled into bank changes. And there is a plethora of direct and online offerings shouting from mobile phones, laptops and bus stops advertising cheap and easy cover.
Insurance brokers are a valuable channel. They have the benefit of knowledge and experience and can offer choice and advice to any customer. This approach is also essential where either the planned trip or the person(s) taking it fall outside of the usual appetite of mainstream travel insurance providers. More on this later.
Varied protection for holidays
Most holiday insurance policies have multiple sections including cancellation, medical expenses, liability, missed departure, repatriation and lost property or documents. There is a great deal of variation in the operation of policy cover and wordings available via the many competitive travel insurance policies in the UK market. The cover available for the different aspects of the risk can be very different depending on the policy wording provided.
Some points of difference might be in:
- The extent of drug and alcohol exclusions
- The cover available for missed departure in terms of the trigger for a valid claim and the amount of compensation provided
- ‘Dangerous’ activity exclusions
- Extended cover where the policyholder is forced for reasons outside their control to stay in their destination longer than expected
- Cover for pre-existing medical conditions or those who are older
- Limits on personal possessions cover
- Covid-related cover
- Traveling to a destination that the FCDO advises against visiting or a change in FCDO advice
- Cover available for cruises.
The myriad of choices makes an informed decision difficult, which is why using a broker can be highly beneficial.
Travel insurance for disabilities, medical conditions and regulation
One of the risks assessed by underwriters is the probability of someone needing medical treatment while abroad. This risk is seen to be raised in those who participate in hazardous activities, those who are older and those with some disabilities and pre-existing medical conditions and many standard policies will not offer cover.
Recognising the challenges that some people living with medical conditions faced when trying to arrange travel insurance, the FCA intervened to ‘improve access for consumers to travel insurance policies that include cover for more serious medical conditions’ embodied into ICOBS 6A.4 Travel insurance and medical conditions (https://www.handbook.fca.org.uk/handbook/ICOBS/6A/4.html ) in April 2021.
The rules mean that travel insurance providers must signpost customers whom they cannot help because of a pre-existing medical condition, to a travel medical firms directory that meets the FCA criteria. Currently there are two such directories with us, the British Insurance Brokers’ Association (BIBA) and the Money and Pensions Service (MaPS).
The FCA estimates there are between 12.6 and 14.1 million consumers with a pre-exiting medical condition that look for travel insurance each year. This requirement to signpost aims to reduce the number of uninsured consumers and to help those who are declined cover, only offered cover that excludes their medical condition, or offered what they consider to be unaffordable premiums. The FCA intends to review the effectiveness of the requirement in April 2023.
Our view is that suitable and competitive travel insurance is available for people with medical conditions, but they need help to find specialists in this area. Brokers have access to specialist covers that can help people travel with suitable insurance in place.
Insurance for older travellers
Most travel insurance providers have upper age limits, though the age at which they are set can range from 60 years old upwards. We have seen many examples of people realising at the last moment that their annual policy or usual provider will no longer grant cover.
Though not a regulatory requirement, the tripartite Agreement on Age and Insurance launched in 2012 between BIBA, the ABI and Government encourages providers of travel insurance (and motor insurance) who cannot cover a customer because of their age to an insurance firm that can, or to a signposting service such as BIBA’s Find Insurance Service.
The Agreement recently reached its 10-year milestone and was applauded by the then Economic Secretary to the Treasury: “I am delighted that ten years after launching in 2012, the signposting agreement between the Government, BIBA and the Association of British Insurers has helped many older consumers access travel and motor insurance, with nearly 900,000 enquiries in total. I look forward to the continued success of the scheme and to working with the sector to ensure consumers can access the insurance they need.”
In summary, despite a reduction in capacity in recent times, the UK travel insurance market is well-placed to meet the differing needs of our diverse population and insurance brokers in particular can help explain what is a complex and highly varied product.