‘Less than one in 100 travel insurers provide complete Covid cover’ screamed the headline. As one, the UK’s travel insurance sector sighed. More bad press affecting the trust that consumers have in the industry. The findings, in a nutshell, were as follows: 263 travel insurance policies were analysed for Covid cover and were rated from ‘Basic’, to ‘Low’, ‘Superior’ and ‘Complete’, the last of which protects travellers against:
- Cancellation due to changes in advice from the Foreign, Commonwealth and Development Office (FCDO) or government lockdowns prohibiting travel
- Testing positive for Covid or being told to self-isolate, and
- Medical costs and repatriation.
While only two policies were rated ‘complete’, a further 85 policies were ranked ‘superior’, providing cancellation cover for travellers having to self-isolate without a positive test, but not for Foreign, Commonwealth & Development (FCDO) advice changing. Only a third (33 per cent) offered cover if travellers cancelled because they were told to self-isolate by the NHS Test and Trace app. Just fewer than one in five (16 per cent) policies offered cover for passengers returning early if advice from the FCDO changed while they were abroad.
Gareth Shaw, Head of Which? Money, said: “Last-minute disruption to holiday plans can happen – and our research shows that many travel insurers don’t offer much protection if it does. The government should work with regulators to ensure that travellers, should they choose to go abroad, are given clear information about what they will and won’t be covered for – and make sure that providers don’t make bold and confusing claims about their cover without being clear about the limitations.”
Are travel insurers making ‘bold and confusing claims’? Most are upfront about the limitations to their coverage – at this point, what have they to gain by any other approach? Transparency in coverage is key. Customers have to read the details of the policy they are buying or, at the very least, should scan the Insurance Product Information Document, which should clearly point out what is and, more importantly, isn’t covered. The information is available to them, and insurers are not deliberately being obfuscating.
It’s also worth pointing out that given the difficulties many insurers have experienced in the past 16 months, it’s hardly a great surprise that not all firms are in a position to offer the most comprehensive cover customers might be asking for. Greg Lawson, Head of Travel Insurance for Collinson, pointed out: “Given the regulatory oversight through the distribution chain, and the consequent time needed to bring new products correctly to market, I don’t believe it is surprising to see such limited product development in recent months. The uncertainty and confusing messaging created with each wave of travel restrictions, and the inconsistency between departure and destination country, has made a post-Covid product challenging to both design, justify, and bring to market when travel has yet to even open fully.”
Customers are confused and annoyed by travel insurers
However, Jessie Smith, Policy and Communications Assistant for the UK Financial Ombudsman Service, confirmed to ITIJ what was suspected – that customers are not happy with the travel insurance sector at the moment. She said: “During the financial year 2020/21 (1 April 2020 to 31 March 2021), we received 8,175 complaints regarding travel insurance. This is a significant increase from 2019/20 where we received 2,510 complaints regarding travel insurance. These complaints will come under several different complaint issue categories. In the complaints data, you’ll see that we received 4,747 complaints with the complaint issue of claim declined.”
The FOS’s annual complaints data showed that at the end of the first quarter of 2020/21, when it shared early insight into complaints linked to the impact of Covid-19, travel and business interruption insurance together accounted for 43 per cent of these cases. Over the year as a whole, the organisation saw an increase of 240 per cent in complaints about travel and special events insurance, where consumers had been affected by cancellations and restrictions.
The Ombudsman noted in its latest report: “We expect insurers to take a pragmatic view of decisions not to travel or to cut short a trip. Where this decision was made earlier than insurers might usually expect, they should consider whether travel advice or restrictions would have meant the consumer would have ultimately had to cancel their trip anyway. If an insurer hasn’t been disadvantaged, we’re unlikely to think it’s fair to decline a claim that would otherwise have been covered.”
insurers might need to be clearer, but the customer has to take some responsibility to knowing what they are buying
Preventing complaints from happening is key to customer satisfaction, and the Ombudsman is clear what needs to happen. Leah Nagle, Financial Ombudsman Manager, noted: “Many complaints could be prevented by insurers providing clearer guidance about the information that consumers need to disclose during the sales process – particularly for sales taking place via price comparison websites. Insurers could also make the consequences of customers misrepresenting, or not telling them about important changes, much clearer. Some people we hear from just haven’t understood how serious the consequences can be.”
ITIJ would argue on behalf of the travel insurance sector that these issues are made clear to customers, but because they are in the terms and conditions part of the sales process, the majority of customers are not really listening, or just click ‘agree’ after scrolling to the bottom of the screen. The deal has to go both ways: insurers might need to be clearer, but the customer has to take some responsibility to knowing what they are buying. It’s a contract they are entering into, after all.
The Association of British Insurers (ABI) told ITIJ that this, essentially, is the point – customers need to understand what they are buying. An ABI spokesperson told ITIJ: “Despite overseas travel restrictions continuing, it is important for travellers to take out travel insurance when booking their holiday, primarily to cover potentially very expensive overseas emergency medical treatment bills, including any Covid-related treatment, which can easily run into tens or hundreds of thousands of pounds. We urge people to read their policy to understand the scope of cover, as policies bought after the pandemic was declared are unlikely to cover cancellation due to Covid as it is a known risk, and travel insurance is designed and priced to cover unforeseen events.”
The UK Financial Conduct Authority wrote to all financial services company CEOs in May 2021 asking them to ‘write to your customers to make it clear how their money is protected’. This is a challenging request, not least because the travel industry is still working to understand and digest governmental rules and restrictions on travellers’ movements. Lawson is right when he pointed out: “The FCDO advice, the traffic lights, the EU digital certificate, the NHS app, and self-isolation are all new and often confusing, but also ever-changing. To deliver clarity on such matters is no easy task and many have decided that ‘less is more’ and that a simple message on medical cover, for example, is more acceptable than creating a new product and trying to explain its relevance in a fluctuating travel world.”
Insurers are working hard to cover the risks people are facing. An experiment I ran on 6 July on a well-known price comparison website yielded plenty of results for a single trip for a British traveller heading to Madeira. Premiums ranged from £12.55 to £50.92, and the results showed the levels of cover for medical and baggage, and excess payments, and whether the policies provided any Covid insurance. I was then expected to click on a button to look more closely at the Covid-related insurance benefits and exclusions, and in nearly all cases, it was made extremely clear what was and wasn’t covered. Overall, I was impressed with the level of transparency shown by insurers. The explanations were in plain English, and were easy to understand. The follow-up email from the company, however, reminded me only of the cheapest three options they had found – the focus on cover seemed to be disappearing.
A difficult year for everyone
Which? is a consumer organisation, and so the research it publishes is focused on what they need to know, which is vital in highlighting important coverage terms and conditions within policies. However, ITIJ, as the travel insurance industry’s platform, has a responsibility to recognise and highlight the challenges the industry has faced throughout the pandemic.
Carl Carter, UK Country CEO of CPP Group UK, pointed out that the industry has to make a product that will outlast the immediate panic of the Covid crisis. He told ITIJ: “It remains of paramount importance that the travel insurance industry can deliver a sustainable solution for the traveller in terms of cover, pricing and risk. Over the last year or so, the market has made significant progress away from the early days of the pandemic when underwriters were ceasing sales, and products and wordings seemed to be changing by the day in response to limited emerging information on the situation.”
There have been moves by the industry to cover claims related to Covid, as the Which? report did point out. Strict underwriting controls have meant that not every company is able to offer cover for every eventuality though. More can be done, according to Carter: “The Which? report demonstrates there is need for the travel insurance market to do more to support the consumer and the risks they are presented with as the consumer returns to travel during and post-pandemic.”
How realistic is it for consumer organisations such as Which? to expect the insurance industry to simply provide 100 per cent cover for all risks?
The risks are the key point here, as Lawson noted: “[We must] recognise the difference between micro risks faced by our customers but also the new macro risks that Covid has really highlighted. There are many products in the market that cover personal Covid risk factors, i.e. relating to your diagnosis or your prescribed test result, where the frequency and severity can be anticipated. However, there are few that cover travel risks created by government and global agencies, such as lockdowns, border controls or surge testing, simply because these have proved difficult to justify, understand and therefore anticipate.”
How realistic is it for consumer organisations such as Which? to expect the insurance industry to simply provide 100 per cent cover for all risks? Not very. Travel insurers need to reinsure their risks, and this has proved harder to come by, according to Lawson: “It is important that consumer associations, commentators and even regulators recognise that, without the reinsurance protection, it is generally not possible to provide ‘complete’ Covid cover, regardless of price. There are many pandemic exclusions or even communicable disease exclusions being placed into reinsurance contracts, and I hope that, with time, the reinsurance market will work closer with travel insurers to recognise the specific travel risks, but also the added protections that have been put into policy wordings, and the lessons learned from Covid.” Lawson is keen for insurers and their reinsurance partners to work together to offer customers more peace of mind in the future.
Moving forward to improve experiences
Supporting the consumer is at the heart of everything the travel insurance sector does – from help when a suitcase goes astray during its journey, to emergency medical assistance and air ambulance repatriation. However, the customer experience doesn’t always reflect the lengths to which the industry can and will go to.
And travel insurers have tried their best to meet the needs of customers, despite the situation in which they find themselves. Lawson has some recommendations for the future as well: “The wider travel industry has been one of the sectors most devastated [by Covid], but the winners will be those who work collaboratively to support the travel recovery and create a long-term proposition strategy, learning from Covid and listening to the customers as they start to travel again. Whatever we do, our aim should be to maximise the chances of customers feeling safe to travel and to ensure they are as clear as they can be in what they have cover for through travel insurance and what other protections, medical and financial, are also available.”
The pandemic has given the travel insurance industry the opportunity to reinvent itself, improve customer experience, and start to rebuild customer trust and experience, said Carter. Digital solutions are going to be key to product differentiation and enhancement, with parametric products at the heart of the industry’s change. Customers need to be able to build the policy that fits their needs – and it needs to be spelled out to them in bold type with flashing sirens all around it if they buy a basic policy, they only get basic cover. Travel insurance can provide incredible value for money – a £50 policy can give you £10 million of medical cover, after all. But if people are only willing to spend £10, then that cover will be diminished. And the customer ultimately took that decision not to spend £50.