Making travel insurance Brexit-ready
More than 58 million trips are made to countries in the European Union (EU) by UK citizens every year, according to figures from the Association of British Travel Agents (ABTA), making it the number one destination. But, whether travelling for business or pleasure, Brexit could have significant ramifications for travel insurance.
Since the Brexit deadline of 31 January, the UK has entered a transition period that runs until the end of the year. During this time, although a flurry of trade talks will be taking place behind the scenes, all travel requirements and arrangements will remain the same.
In spite of this hiatus and the continuing uncertainty around what may happen, Matt Francis, insurance director at KPMG, says travel insurers are ready. "Insurers have been looking at the potential implications since the referendum and, although there is still uncertainty, they are generally in a good place with their preparations," he says. "They have already had a couple of false starts too, with annual policies written from April 2018 designed to take the original Brexit date, 29 March 2019, into account."
Possibly the biggest change from a travel insurance perspective would be the removal of the reciprocal healthcare arrangements. Until the end of 2020, a UK citizen with a European Health Insurance Card (EHIC) is able to access state medical care in other European Economic Area countries and Switzerland.
Although the UK government is in negotiations to enable this arrangement to continue beyond 2020, there could be ramifications for travel insurers. "If it is replaced with reciprocal health arrangements then, other than some disruption for consumers, there will be no change," says Nel Mooy, head of travel proposition at Axa Insurance. "However, if these are not agreed, anyone visiting the EU will need to be sure they have appropriate cover on their travel insurance."
There is also the risk of confusion, as not all treatments covered by the EHIC will be picked up by insurers. As travel insurance is designed to pick up the tab for unexpected medical treatment, any expenses incurred for pre-existing conditions such as kidney dialysis and oxygen therapy will fall to the individual.
This could have a couple of implications for travel insurers. With gaps in healthcare provision, there may be discussions as to whether these pre-existing condition treatments should be covered. Ms Mooy is adamant cover will not be extended. "Anyone travelling needs to make sure they have the right cover," she adds. "Risks vary considerably."
A different issue may arise for insurers who would have previously insisted that policyholders carry an EHIC. As they could pick up some costs that would have fallen onto
the EHIC, they might be forced to increase premiums.
Without the current framework, it could become much more complicated for insurers to recover costs
Come 2021, Brexit could also mean changes for anyone getting behind the wheel on the EU's roads. Alongside the return of the green card to prove you have sufficient insurance cover, drivers may require an international driving licence, with requirements potentially varying across the EU.
For insurers, as well as the additional administration associated with green cards, there is also the potential for further costs as a result of the removal of the motor insurance directive. Mr Francis explains: "A UK citizen involved in a road traffic accident can claim compensation in the UK in English. The Motor Insurance Bureau is looking to replace the directive with bilateral agreements but if this doesn't happen, it could make claiming compensation more difficult. There may be an opportunity for insurers to take on this risk with personal accident cover."
These changes may also mean insurers facing additional expense when claiming back costs where a policyholder was involved in an accident that was not their fault. "Without the current framework, it could become much more complicated for insurers to recover costs," Mr Francis adds.
DISRUPTION AND DELAYS
Concerns are also mounting about possible disruption to travel. While government talks to ensure planes are not grounded are well underway, increased security checks at borders could mean claims for missed departures and delays could increase.
This has the potential to drive up claims inflation, with ramifications for premiums. What's more, as cover for delays and disruption is not automatically included on all travel insurance policies, there is a risk of complaints and reputational damage for insurers.
Given the amount of change that could potentially happen and the difference in cover across the market, Ms Mooy says that insurers have an important role to play in helping consumers understand how Brexit might affect them. "Insurers need to keep an eye on what's going on and keep their customers informed," she says. "We have been active on social media for some time, sharing information about how they might be affected, including alerting them to the fact they may need to allow extra time to get through security." Keeping up this dialogue ahead of 2021 is essential. As well as ensuring that policyholders do not get caught out by any Brexit-related changes, providing valuable risk management advice could also help insurers maintain their claims costs and their reputations.
Sam Barrett is a freelance journalist