First published in ITIJ 104, September 2009
Could the travel insurance industry do more to encourage clients to stay out of trouble on holiday and explain how to get help when the worst happens? Robin Gauldie explores this contentious issue
Even the most rational of us breathe a sigh of relief after making sure we are fully covered for our next trip. Medieval travellers setting out on pilgrimages or primitive warriors going into battle wore their blessed medals, charms and amulets. Nowadays, instead of a strip of sacred script, we carry our policy documents. But lucky charms are not, in fact, reliable protection against the dangers of the real world. Similarly, no insurance policy has yet been invented that actually prevents accidents. In other words: insurance is not protection. Yet, arguably, all too many holidaymakers act as if their insurance policy can indeed protect them from harm before the event – rather than just helping out with the consequences.
In the US, according to Brad Finkle, president of the US Travel Insurance Association (UStiA), many people – including policyholders – are not even fully aware of the range of practical emergency assistance benefits included within most comprehensive travel insurance policies, such as medical evacuation coverage. “Many people are also unaware of legal assistance available through most comprehensive travel insurance policies,” he says.
So, whose responsibility is it to ensure consumers know exactly what they’re buying: The consumer himself?; The insurer or broker?; And what about the role of governments and embassies in helping travellers minimise the risks they take abroad?
Reading the small print
Some governments have taken up the challenge of urging their nationals to take more care on holiday; others are less specific in their advice on travel insurance and the caveats surrounding most policies. With typical Aussie bluntness, the Australian government’s ‘Smartraveller’ campaign warns: “If you can’t afford travel insurance, you can’t afford to travel.” But while it points out that travel insurance policyholders should read and understand the small print in their documents, there is no specific advice on how to avoid behaviour that may render their insurance invalid. The UK Foreign & Commonwealth Office’s (FCO) website, however, has an admirably clear travel insurance section. As well as pointing out the huge costs of medical repatriation for the uninsured and highlighting what travel insurance should cover, it also points out, in so many words, that most policies will not cover drink or drug-related incidents.
Unfortunately, travellers who are most likely to behave irresponsibly when arriving at their holiday destination are probably the least likely to seek out unbiased advice on travel insurance before they leave home
Unfortunately, travellers who are most likely to behave irresponsibly when arriving at their holiday destination are probably the least likely to seek out unbiased advice on travel insurance before they leave home. With this in mind, the FCO has taken a different tack. For the third year running this summer, British consular representatives in Greece – something of an incident black spot for UK holidaymakers – have been targeting British travellers in the 16 to 20 age group at Greece’s rowdier holiday resorts with an on-the-spot campaign. Faliraki on Rhodes, Kavos on Corfu, Malia on Crete, Laganas on Zakinthos and Kardamena on Kos have all become notorious for a range of incidents involving young Britons – ranging from public indecency and disturbing the peace to violence and serious sexual assault. In most incidents, perpetrators as well as victims are holidaymakers.
Using unconventional media such as beer mats, Y-cards and posters to get the message across in bars, clubs and taxis, the campaign aims to raise awareness of incidents that can occur on holiday and is an extension of the FCO’s ‘Know Before You Go’ campaign. “We don’t want to spoil the fun, but to make people aware that things can go wrong on holiday too and what people can do themselves to reduce that risk,” says the UK’s vice-consul in Corfu, Sarah Ticherou. “Whilst it will always be difficult to give specific statistics on the effectiveness of the campaign, I do feel that the messages have an impact.” A commendable effort on behalf of the UK government, but should the travel insurance industry itself be doing more to warn clients that certain actions have consequences that can often render their insurance claim invalid?
Take, for example, the issue of excessive alcohol consumption on holiday. A recent survey by UK-based Essential Travel (ITIJ 102, July 2009, Alcohol exclusions catch tourists) found that eight out of ten British holidaymakers owned up to getting ‘very drunk’ on holiday, but 70 per cent of travellers failed to realise that if they are injured or lose personal property while under the influence of alcohol, their travel insurance claim is likely to be refused.
"The issue of alcohol related claims is always difficult,” says Paul Everett, director of sales and marketing for Europ Assistance. “As an industry, we’re obviously aware that people go on holiday to enjoy themselves. Travel insurance does not cover every eventuality and the majority of people realise this,” he added, “However, a few unfortunately think insurance cover makes them invincible! It is very important that as an industry we push awareness so holidaymakers understand the exclusions of travel insurance.”
Graeme Trudgill, technical corporate affairs executive at the British Insurance Brokers Association (BIBA), summed it up neatly: “We are not going to throw your claim out over one glass of wine, but if you are involved in an accident after a 10-pint pub crawl, that is a different matter. Is that point made clearly enough? Even we could probably do better but, at the end of the day, people do have to behave sensibly.”
The root of the problem
Some insurance industry voices say the problem occurs primarily at the point of sale. “What we have found is that inadequate information is being provided because most of the industry is price-led,” said Stuart Bensusan, insurance director at Essential Travel. “There are more and more comparison websites, and there is an issue that comparison websites are not transparent enough and do not provide enough information.” Essential Travel has adapted the way it presents its products to provide highly visible information on different levels of cover and exclusions, Bensusan said, and follows this up throughout the buying process. “At the confirmation stage, we reiterate that they [the customer] must read and understand all the information that we have provided to them. But ultimately, it does come down to common sense.” Bensusan cited the case of one policyholder killed in a motorcycle accident while not wearing a helmet and while several times over the legal alcohol limit. “In that instance, we were unable to accept the claim,” he said.
Philadelphia-based lawyer Dick Atkins, who operates a legal hotline for the UStiA, says many insurers are reluctant to deny claims where alcohol may be involved because of the risk of attendant bad publicity. “They don’t want to get involved in quibbling over ‘how drunk is too drunk’,” said Atkins, “Unless it is a major claim and the issue of intoxication is open and shut, they may prefer to settle and avoid bad PR.”
Within the UK, the handing over of travel insurance regulation to the Financial Services Authority (FSA) in 2008 is credited by some in the industry with increasing the onus on insurance sellers to confirm that customers are receiving, and are aware of, the key points of their policies. The FSA’s guidelines insist that authorised firms, intermediaries and travel agents selling travel insurance must ensure the main benefits, exclusions, limitations and conditions are explained. “In ICOBS 6.1.5, the rule explains what an insurance intermediary and insurer are required to do in order for the customer to make an informed decision,” said FSA spokesman Robin Gordon-Walker. The rule states that a firm ‘must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed’. But is this rule being flouted? And is it not a little vague?
Like Bensusan, BIBA’s Graeme Trudgill said the commoditisation of insurance through Internet comparison sites is encouraging travellers to buy policies that may not meet their needs. “Lots of travellers, especially younger travellers, buy on the Internet and look only at the price without looking at exclusions and excesses. People aren’t getting the advice they would get from a broker. Trudgill also commented that BIBA members clearly flag up key facts and significant exclusions, but claims that other insurance distribution channels ‘have a long way to go’. He said: “Lots of comparison sites are problematical and are failing in that area,” but he also points the finger of blame at the retail travel sector. While insurance brokers will take the time to go through a policy point by point with the client, said Trudgill, too many travel agents have a ‘tick the box and off you go’ mentality when selling insurance, and few take the time to tailor policies to the client’s specific requirements.
The travel insurance industry doesn’t do much to change the general misconception that it will cover almost any financial loss that occurs on holiday
Mike Monk, head of financial services at the Association of British Travel Agents, denies this. “Unless authorised by the FSA, or selling on behalf of a company authorised by the FSA, travel agents no longer sell travel insurance,” he pointed out. “BIBA is trotting out an old line that was never actually true in the first place.” However, Monk did concede: “Yes, the insurer should make any exclusions very clear, including that the policy doesn’t cover them for their own irresponsible actions, but it is difficult for any one selling travel insurance to go through the whole policy point by point.”
There are honourable exceptions to the alleged poor level of information provided by online comparison sites. Moneysupermarket, for example, points out prominently on its site: “Your insurance company will not pay out if you are responsible for an accident, injury, etc ... through being drunk or using illegal drugs.” And, earlier this year, a rare example of plain speaking came from UK company InsureandGo, which appealed to policyholders taking its winter sports insurance to behave responsibly after the company commissioned research that revealed an estimated one million British people had gone skiing or snowboarding while drunk. “Being drunk on the slopes is extremely dangerous,” said InsureandGo’s founder, Perry Wilson. “If you injure yourself or somebody else as a result of this, you may invalidate your insurance cover, which could mean that as well as nursing broken bones, you may also have to pay for a hefty medical bill yourself.”
Not so clear cut
Meanwhile, in the US, a growing row over the alleged mis-selling of so-called ‘trip protection’ policies has prompted intervention by the UStiA, which intends to issue consumer advice clarifying the difference between trip protection and full travel insurance cover. The issue has been highlighted by the collapse earlier this year of several trip protection providers. Travel insurance in the US is regulated at state level, and at least two states are now investigating several of the failed trip protection companies amid allegations that they provided illegal and unlicensed products.
Lawyer Dick Atkins says there has been a recent boom in allegedly fraudulent trip protection schemes, with recession-hit US travellers looking to save money on travel policies. Even though US travel retailers have sold trip protection for decades – often to cruise package customers – even legitimate trip protection policies typically provide nothing more than limited cover against cancellation of the holiday by the holiday provider. ‘Weather events’ – the most common reason for cancelling a cruise – are not usually covered. Crucially, neither are medical treatment or repatriation, yet it is being claimed that many purchasers of trip protection believe they are buying full travel insurance coverage.
In a similar vein, a recent article on UK website lovemoney.com made the pertinent point: “The travel insurance industry doesn’t do much to change the general misconception that it will cover almost any financial loss that occurs on holiday.” And isn’t this the crux of the issue? Couldn’t travel insurers do more to educate consumers about common misconceptions regarding travel cover, such as those explored in this article? As we have seen, the British government, for example, offers sound advice on the matter, but still there seems to be room for improvement among many insurers when it comes to prominently declaring exactly what a policy does and does not cover, especially when it comes to educating policyholders about the basics of the medical assistance cover they have purchased, the concept of pre-existing conditions and what this includes, exclusions that might relate to common ‘hazardous activities’ such as jet-skiing or motorcycle riding, and the risk of invalidating cover following the consumption of alcohol.
We are not going to throw your claim out over one glass of wine, but if you are involved in an accident after a 10-pint pub crawl, that is a different matter
Insurance will never be a substitute for common sense. But even ‘well behaved’ travellers often lack education when it comes to the travel protection they have purchased. Insurance itself isn’t protection against things going wrong, but it goes without saying that insurers and holidaymakers alike would be better off if policyholders had a better understanding of the basics behind their policies.