From cancellations to skiing injuries, travel insurance provides consumers with considerable peace of mind. But the sector is under increasing pressure, as Sam Barrett explains-¦
Travel insurers paid out £385m in claims in 2017, taking the pain out of everything from cancelled flights to blocked intestines. But, while most holidaymakers do not give their cover a second look, the travel insurance sector has come under considerable scrutiny in the past year.
Among those looking at the way cover operates is the Financial Conduct Authority (FCA). As part of its work on access to insurance, it sought views on travel insurance from people who have, or had, cancer. The regulator found that consumers did not know where to find the specialist services that could source them appropriate insurance, so they were often left them with expensive cover, or worse, none at all.
The findings come as no surprise to Fiona Macrae, head of Travelinsuranceexplained.co.uk, who says the way insurance is sold has contributed to the problem. "The comparison sites have tried to commoditise the product too much," she says. "Someone with a medical condition will try to get cover from a site and be declined. Then, as all the sites use the same medical screening criteria, they'll be declined by the others too, and believe they're uninsurable."
Another solution she sees consumers using to secure travel insurance is to exclude cancer. However, she warns that this has potential drawbacks too. "Do this and you're not just excluding treatment for cancer but for anything that could be attributed to it. As an example, the risk of deep vein thrombosis increases as a result of flying but also as a result of taking some cancer medication. People need to be able to make an informed choice about their cover."
To address these issues and ensure that consumers with medical conditions can access affordable cover, the FCA has proposed a new service to redirect consumers to specialist providers. How this will operate is still to be determined but the market has welcomed the proposal.
Chris Rolland is chief executive of AllClear Travel Insurance, a specialist provider that has helped more than a million people with medical conditions access cover. "There needs to be much better signposting," he says. "The government and the healthcare sector have a role to play in promoting best practice."
A similar mechanism is already in place for older travellers, through the Agreement on Age and Insurance between the government, the Association of British Insurers (ABI) and the British Insurance Brokers' Association (BIBA). This came into effect in 2012 and has enabled more than 40,000 older people to source suitable travel and motor insurance.
While it is positive that the industry is taking steps to help people with medical conditions access travel insurance, there is still plenty of confusion among the wider public. Figures from ABTA show that as many as two in five people -- equivalent to 9.9 million Brits -- travelled abroad without the right cover, with common mistakes including not disclosing medical conditions and taking part in activities without checking the policy covers them.
Getting it wrong can be expensive. Figures from Admiral show that while breaking an arm in France can cost up to £1,000, having a heart attack in the US could leave a holidaymaker with a memorable bill for anything from £50,000 to £200,000 plus a further £30,000 for repatriation.
Again, many see the commoditisation of cover as to blame for this confusion. "People get a cheap quote and don't bother to look at the terms and conditions," says Andy Jenkins, operations director at Russell Scanlan. "Only when they need to make a claim do they discover their cover is inadequate: this can be an expensive oversight when it's something like medical expenses or repatriation."
Adding to the confusion is the fact that, as risks and holiday habits change, policy wordings are constantly evolving. A good example of this is cancellation cover. Although this is one of the key areas for claims -- with ABI figures showing that £145m was paid out for 174,000 cancelled holidays in 2017 -- policy wordings vary hugely.
"Some newer policies include cover for cancellation 'however caused', provided that the cause was not known at the time of the insurance being taken out or the holiday booked," explains Graeme Trudgill,
executive director at BIBA.
"This can pick up cancellation reasons such as volcanic ash and scheduled airline failure. Other policies might only cover basic risks such as sickness and jury service."
Cover for terror attacks is also beginning to emerge on travel insurance policies. Mr Trudgill says that more policies now include cover for claims for medical treatment and repatriation following a terror attack but others will go further. "Some specialist policies will also offer cover to allow
a trip to be cancelled because there's been a terrorist incident at the holiday destination," he explains.
While commoditisation may be partly to blame for holidaymakers taking out the wrong cover, about one in five holidaymakers still go abroad without travel insurance, according to the ABI. Reasons for this can include believing it is not necessary as they already have a European Health Insurance Card or some cover included with their bank account or, as mentioned above, not being able to access affordable cover due to medical conditions.
More education is essential to ensure they do not take this risk. "The travel insurance industry needs to help consumers understand the types of cover that are available and what's right for them," Ms Macrae explains. "It's much better to point out that for an extra couple of pounds someone will have the cover they need, rather than let them take out a cheap policy and be disappointed at the point of claim."
British holidaymakers are gaining a 9.5m keen to stamp out. In addition to reputation for having very dodgy tummies, following an increase in holiday sickness claims during the past couple of years. Figures from ABTA, which is running a Stop Sickness Scams campaign, show there has been a 500% increase in the number of compensation claims received by travel companies for holiday sickness since 2013.
This increase is being driven by the claims management companies, with ABTA believing that as many as 9.5 million people in the UK have been approached about making a claim for holiday illness. "It's often seen as a victimless crime but it has serious repercussions," says Andy Jenkins, people in the UK have been approached about making a claim for holiday illness since 2013 operations director at Russell Scanlan. "As well as pushing up the cost of holidays and even seeing Brits barred from some hotels, false compensation claims are fraud, which can result in large fines and even jail terms of up to three years."
As these claims are costing about £50m a year, it is a trend that the insurance industry, travel companies and the government are investigating and defending potentially fraudulent claims, a key part of this action was the introduction in May of fixed recoverable costs on these claims. Mark Hudson, head of counterfraud at Horwich Farrelly, says this has already had a significant effect. "We've seen a reduction in the number of claims companies operating in this area, and with it the volume of claims made," he explains. "However, the new rules only apply to gastric illness claims and not other injury or illness claims. The industry must remain vigilant to ensure that any holidaymaker or professional enabler making a dishonest claim pays the price."