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Why is Travel Insurance important?

The Travel Insurance is an important adjunct to travel, particularly package travel, tours and cruises.

Many tour and cruise packages highlight the advisability of travel insurance in their booking conditions, using words to this effect:

We strongly recommend you take out travel insurance before travelling.

Travel Insurance is sold by travel agents, credit providers and transporters as an "add-on" to the travel, tour or cruise. Travel insurance is also sold as an adjunct to business insurance, to cover travel by key personnel. Travel insurance can be purchased for specific travel, such as an airflight, for the duration of a tour or for a period of time, such as annually. The commission paid by the insurer to the seller of travel insurance can represent a significant source of income for the travel agent.

For the travel consumer, travel insurance can alleviate the expenses of many of the risks associated with travel. The principal risks are:

  1. cancellation before and during the travel; 
  2. loss of baggage, personal effects, cash and credit cards during the travel; 
  3. medical, hospital and dental expenses during the travel (outside of the home country); 
  4. emergency expenses, repatriation and accidental death during the travel; and 
  5. delays or substituted travel arrangements during the travel.

Travel insurance claims are paid where a risk materialises which is outside of the control of the travel consumer.

Coverage is limited to the risks for which insurance is taken out. The cost of insuring for each of these risks varies according to the nature of the risk and the level of coverage required.

What do you look for in choosing a travel insurance policy?

The travel consumer must:

  1. Choose the risks desired to be covered, with a view to the type of travel (luxury, adventure, organised tour), place of travel (Australia, Europe, Middle East, Asia, North & South America), and personal circumstances (age, fitness, health). 
  2. Check the conditions and exclusions: if the travel or tour includes high risk or adventurous activities such as scuba diving, ballooning or sport, are claims resulting from these activities excluded? Is luggage left overnight in a rental car excluded? 
  3. Choose the level of the coverage for those risks where limits apply, such as loss of baggage, medical and hospital expenses. Take into account also the limited compensation available from airlines and cruise operators. 
  4. Disclose pre-existing medical conditions and dangerous activities to be engaged in to the insurer and if the insurer accepts these risks, pay the extra premium. Otherwise, no coverage will exist even though the premium has been paid. 
  5. Be aware of any travel insurance available as a benefit of purchasing travel using a credit card or through an employer s policy and the necessity to obtain separate insurance for rental car hire. Check if the travel insurance purchased requires a claim upon these policies or requires a claim upon an airline, cruise operator or hotel first.

Travel Insurance Policies: Conditions and Exclusions

Constant themes running through the disputes are the failure of consumers to read the policy and their over optimistic expectations of the cover. (from an Annual Report of Insurance Enquiries & Complaints Limited).

Travel insurers make extensive use of conditions and exclusions in their policies both to limit claims by placing a cap on liability and to exclude claims in circumstances where the travel consumer is at fault.

The conditions and exclusions contained in the travel insurance policy are the major reason travel insurers use to refuse claims by travel consumers.

Travel Insurance policies are similar around the world both in terms of coverage and in terms of conditions and exclusions. Many are based on the American Home Assurance Policy Form, with fine tuning to the terms of the conditions and exclusions.

Travel Insurance Claims: What must the travel consumer do?

Claims for compensation must be made by travel consumers according to the travel insurance policy. These comments are made:-

  1. Notification of the loss or injury to the insurer at the earliest opportunity is always the best advice a travel consumer can follow. 
  2. Claims such as compensation for lost or delayed baggage, injuries, emergency expenses, repatriation will be recognised only if the insurer is notified before purchasing replacement baggage or incurring expenses. Where items are stolen, a report must be filed with the local police. 
  3. The insurer s claim form should be completed or a letter sent with full particulars of the claim, including receipts for items and expenditure claimed.

Airlines, cruise ships, The Travel Compensation Fund and credit card providers, should be pursued (where relevant) at the same time as the insurance claim is made, as the insurer will pay only what cannot be recovered from these sources. Time limits can be important. Note for example, that claims for baggage damaged or contents lost by an airline must be made within 7 days, (if it is wholly lost then within 21 days) of the event.

Travel Insurance Claims: The Code and the Scheme

The following statistics for the 1998 calendar year in Australia provide perspective:-
travel insurance policies issued (including renewals): 1,279,054

  • claims made: 108,230
  • disputes referred to the Panel: 974

Travel consumers in Australia are assisted in making claims and resolving disputes with insurers by the General Insurance Enquiries & Complaints Scheme, in which all travel insurers participate.

The Scheme is administered by Insurance Enquiries & Complaints Limited which oversees two procedures for dealing with insurance disputes in general, and travel insurance disputes in particular:-

  1. A Code of Practice for insurers to follow when dealing internally with claims made by consumers; and 
  2. A dispute resolution service for resolving disputes between travel consumers and travel insurers, administered by an Insurance Claims Review Panel.

The Code of Practice:

Once a claim is made, the desire of the travel consumer is to obtain a final decision from the insurer, as quickly and as satisfactorily as possible.

Under the Code of Practice, the insurer must promptly consider the claim, keep the consumer informed of the progress of the claim and act in a professional manner.

Complaints can be made to Insurance Enquiries & Complaints Limited if an insurer fails to deal with the claim according to the Code. The threat of making such a complaint will usually be effective.

Claims Review Panel:

A travel consumer who is dissatisfied by the final decision of an insurer in response to a claim may make an Application for review of the decision to the Claims Review Panel. These comments apply:-

  1. The Application must be made in the prescribed form within 3 months of the decision. The Application is free. 
  2. The Claims Review Panel will investigate the Application, and determine the dispute on the paperwork provided in the Application and in the insurer s file, usually without a hearing at which anyone attends. 
  3. When the Claims Review Panel issues its decision, the travel consumer has 20 days within which to accept or reject the decision. 
  4. If the travel consumer accepts the decision, then the insurer must make the payment within 15 days of an agreement being signed. 
  5. If the travel consumer rejects the decision, then they are entitled to litigate in the courts or pursue claim in the Consumer Claims Tribunal, with the proviso that the insurer need not keep to the decision either. 
  6. The Claims Review Panel can only assist if the travel consumer has pursued their complaint with the insurer and is dissatisfied with its decision on the claim. 
  7. Although a travel consumer may litigate at any time, the cost and delay of litigation make it unattractive to do so while the Panel is considering the Application.

Examples of disputes determined by the Panel:

These are a selection of case summaries of disputes decided by the Claims Review Panel:

Lost Luggage:

Case 973732: The claimants left two suitcases in the boot of their car which was backed into a space under a concrete ramp (to prevent the boot being accessed) in a security - patrolled carpark in Calgary, Canada. The thieves gained access through the rear seats and stole goods worth $5,000. The Panel refused the claim because of the exclusion in the policy of "items left unattended in any motor vehicle overnight (even if in the boot)", which applied regardless of the reasonable precautions that were taken.

Case 974442: The claimant was travelling by London Underground train from Heathrow Airport to London. His suitcase was placed next to the allocated baggage area (which had approx. 20 suitcases). The claimant was seated within arms length and within sight of the suitcase. The train was very crowded and the suitcase was stolen at one of the stops in the confusion. The Panel allowed the claim. It decided that the suitcase was not unattended because it was within reach and eyesight and therefore the exclusion in the policy did not apply.

Cancellation expenses:

Case 973558: The claimants had booked a 5 day/night cruise to the Galapagos Islands. Before the cruise, another boat was substituted with an itinerary which did not include seeing "giant tortoises in the wild". Expenses of an extra trip for this purpose and cancellation of a trip to Peru which could no longer be taken because of the extra trip were claimed. The Panel denied the claim because of the exclusion in the policy when "a member of the travelling party decides to change or not to continue with the trip". Compensation for the shortfall in the trip lay with the travel agents involved (who had already given some compensation).

Additional Expenses:

Case 974062: The claimant was seriously injured in a car accident and hospitalised in California. The claim was for the additional expenses of travel, accommodation, telephone calls and meals of both parents, who had been told by the hospital that "they should came to California to be with him". The policy did cover additional expenses of these kinds. The parents applied to the insurer for the additional expenses before leaving, but were refused. The Panel decided the insurer s refusal was unreasonable and allowed additional expense reimbursement (as claimed) but for one parent only.

Pre-existing medical condition:

Case 973412: The claimant had consulted his doctor on 25 July complaining of back pain, took out travel insurance on 7 August and became incapacitated with back pain on 3 September. The Panel denied the claim for cancellation costs because the illness was pre-existing and not disclosed to the insurer. The Panel allowed the claimant's daughter s claim as she could not be expected to be aware of her father s pre-existing illness.

CORDATO PARTNERS WILL:

Advise and assist travel consumers:

  1. on the interpretation of the conditions and exclusions in the policy to decide whether a claim is possible and the requirements to make a successful claim. 
  2. in drafting replies to requests for further information for consideration of a claim by the travel insurer and assisting in the application to the Claims Review Panel. 
  3. to pursue court proceedings for recovery of the claim.
     

Advise and assist the travel agent and tour operator:

  1. on proper practice on the sale of travel insurance to travel consumers. 
  2. on their responsibilities to travel consumers where the travel insurance is insufficient or claims are denied due to faulty explanation of the policy by the travel agent. 
  3. in defending claims and court proceedings brought by travel consumers and travel insurers.
     

Advise and assist the travel insurer:

  1. in drafting replies to claims made by travel consumers, and defending applications to the Panel and Court proceedings; 
  2. in drafting and modifying conditions and exclusions, and travel consumer notifications in travel insurance policies; 
  3. in pursuing claims for reimbursement against airlines, cruise lines, tour operators and accommodation providers.