Travel insurance: So much for peace of mind

There are horror stories about travel insurance leaving people in the lurch. If you don’t have time to read the fine print, make sure you read this.

What can you buy without using, use without buying, have without knowing and know nothing about when you have it? If travel insurance is a riddle, most of us don’t have the time or inclination to work it out. But when it’s a matter of life and death, nobody is amused to find the answer is: “Sorry, you’re not covered for that.”

Buy without using

People who buy travel insurance don’t really expect to use it. In fact, many of us are so blasé about the risks involved in travel that we don’t buy it. Andrew Starke used to work for a travel assistance company and has helped travellers through some terrible situations. “I would think that travel insurance was a rip-off except I have seen it literally save people’s lives – certainly financially.” So does he buy travel insurance? “I must admit I don’t. Everybody always assumes that nothing’s going to go wrong.”

He has a point. According to George Novis, the managing director of TIC, South Africa’s leading travel insurance provider, only five percent of individual policies will result in a claim. But it’s also worth considering that TIC dealt with about 15,000 claims last year and paid out approximately R50-million to its clients.

Almarie Nel, assistant manager at Sta Travel in Rosebank says 40 to 50 percent of their customers buy travel insurance, which she feels is good going. Why don’t more people opt in? “A lot of people will only realise the benefit of it if they claim,” she explains. Alissa Baxter, communications officer at TIC, agrees: “Many people don’t recognise the need for travel insurance, so it’s often a grudge purchase.”

Use without buying

Sometimes travel insurance isn’t a purchase. When advertising manager Ingrid Versveld’s mother broke her ankle in Croatia, they were able to claim because Ingrid had paid for her mother’s flight tickets with a Standard Bank credit card. “I paid the first few thousand of the hospital bill and they paid the rest, plus extra accommodation.”

This all sounds hunky dory, but there are a couple of pitfalls to free credit card insurance. Perhaps it’s stating the obvious, but you’re not covered if you didn’t use your card to pay. “Automatic credit card insurance can be a bit scary because people might think they have it, but then they paid with cash,” said Alissa Baxter.

Noa Kraut, assistant ombudsman at the Ombudman for Short Term Insurance pointed out another problem: “Credit card travel insurance is usually a baseline product with really minimal cover. There’s often no lost luggage protection and claims are capped quite low. People are issued with a schedule but the things it doesn’t cover are left out and people don’t realise this.”

Have without knowing

Another possible source of free travel insurance is your medical aid membership. Journalist Leigh Stefanski was in a sticky situation when she hurt her knee skiing. Her travel insurance would only cover the operation if she returned the next day, even though she had planned to travel for another two months and the doctors said she could have the operation later.  She called Discovery as a last resort, without knowing that her membership entitled her to international travel insurance. “They paid for the operation when I got back, but I had to cover all my physio and rehabilitation costs.”

If she hadn’t had the right medical aid membership, she wouldn’t have been covered at all. Your medical aid membership also won’t automatically cover pre-existing health problems when you travel, even though it covers them at home – you have to buy additional cover. If you are an Oxygen member under 65, you qualify for free travel insurance – as long as you declare your travel dates before you leave. If you’re over 65, you have to pay a premium – and your pre-existing conditions will not be covered. It’s  possible that nobody will tell you any of this unless you ask.

Know nothing about when you have it

This brings us to the most bothersome part of the riddle. Most people expect to be covered for any eventuality if they have travel insurance. You certainly don’t expect clauses and conditions you’ve never heard of, especially if you buy travel insurance from someone who should know, like a travel agent.

According to Noa Kraut, the biggest problem they encounter is that travel insurance is often sold by travel agents who aren’t trained and don’t find out people’s requirements. “The one complaint we had was from a man who was 70 and his travel agent had sold him a policy that provided no cover for people over 65. That’s just silly!”

A frequent traveller, Andrew Murison discussed his expectations with his travel agent when he bought travel insurance. But when he made a claim, he encountered an unexpected result. “My friend and I were admitted to hospital in Brazil for a crazy stomach bug. We claimed it back but had to combine our expense forms to make it to the minimum threshold amount. I didn’t read about that minimum claim bit in the fine print. And there was an excess, so we didn’t get it all back.”

One solution is to buy your travel insurance through a qualified broker, or even to buy it online. “Buying any insurance online is dangerous. You’re taking the risk on yourself,” says Noa Kraut. But this could mean you’ll be more likely to familiarise yourself with the terms and conditions. Unfortunately, that seems to be the crux of the matter.

An inconvenient answer

I say unfortunately because ‘read the fine print’ is not a popular recommendation, but that’s exactly what your insurers are going to do. “We carefully read the client’s story on the claim form,” says Noel Joseph, claims manager at TIC. “Then we extract the bits that are relevant to the conditions of the policy. If their claim meets the conditions, the claim will be paid.”

The terms and conditions are so important that if you don’t receive a copy of them within 30 days of taking out a policy, the insurer is obliged to pay your claim.  “In the old days, they would just give you a brochure with a schedule, but now it’s the law that you have to give terms and conditions to every insured on the purchase of every policy,” says Noa Kraut.

It’s not like we could care less, though. “Good luck with that,” a fellow travel journalist said when I got my travel insurance card. “It’s never done me any good.” When I asked him if he had ever read his policy, he looked at me as if I was mad.

Travel insurance research: The bare minimum

If you can’t stand the thought of wading through pages of legalese, make sure you ask these questions:

How long will I be covered for? Most travel insurance policies only cover trips up to 90 days.

What is the maximum age? In most cases, seniors have to pay additional premiums because they are the highest risk group. Some insurers won’t cover people over a certain age at all.

Does it include lost luggage? You may also need some way of proving ownership.

What are the excesses and single item limits? Excesses can be prohibitively high and single item limits can be pitifully low. If your R20,000 camera is stolen, you could end up getting only R1,000 for it.

What are the major exclusions? The most common exclusion is pre-existing medical conditions, but cardiovascular problems may also be excluded, especially if you are a senior.

What is the prior authorisation limit? Most travel insurance policies stipulate that you must obtain authorisation from them or the assistance company before incurring expenses over a certain limit. This limit can be as low as R1,000.

Are my activities covered? Adventure activities or sports like bungy jumping, motorcycling or scuba diving may not be covered or may have specific conditions attached to them.

Who’s who in travel insurance?

The agent or broker

Agents like your travel agent or tour company usually only sell a limited variety of products. Qualified insurance brokers are more likely to to have in-depth knowledge of policies and to offer a wider variety. In the case of credit card insurance, the credit card or bank is the broker.

The insurance provider

TIC and AIG are both examples of insurance providers. They process applications, administer policies and claims and sell policies directly or through agents and brokers.

The underwriter

The underwriter designs the terms and conditions and negotiates the premiums. They also ultimately take the risk, as the money to pay claims comes from them. The underwriter for TIC, for example, is Santam.

The assistance company

Companies like Europ Assistance and International SOS are contracted by travel insurance providers to provide an emergency assistance and claims co-ordination service. This is not free, so if you don’t have travel insurance or your situation is not covered by your policy, you will have to pay for it. Depending on the complexity of the problem, this could be very expensive.

The Ombudsman for Short Term Insurance (OSTI)

This is an independent body of insurance experts and lawyers reporting to a Board consisting of consumer representatives and members of the insurance industry. Complaints about insurance can be submitted to the ombudsman. Insurance companies are bound by the decisions of the ombudsman, but you are not. For every complaint received, the OSTI charges the insurer a fee.

First published in the December 2007 issue of Getaway Magazine.

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