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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:
- cancellation before and
during the travel;
- loss of baggage,
personal effects, cash and
credit cards during the
travel;
- medical, hospital and
dental expenses during the
travel (outside of the home
country);
- emergency expenses,
repatriation and accidental
death during the travel; and
- 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:
- 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).
- 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?
- 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.
- 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.
- 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:-
- Notification of the loss
or injury to the insurer at
the earliest opportunity is
always the best advice a
travel consumer can follow.
- 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.
- 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:-
- A Code of Practice for
insurers to follow when
dealing internally with
claims made by consumers;
and
- 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:-
- The Application must be
made in the prescribed form
within 3 months of the
decision. The Application is
free.
- 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.
- When the Claims Review
Panel issues its decision,
the travel consumer has 20
days within which to accept
or reject the decision.
- If the travel consumer
accepts the decision, then
the insurer must make the
payment within 15 days of an
agreement being signed.
- 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.
- 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.
- 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:
- 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.
- 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.
- to pursue court
proceedings for recovery of
the claim.
Advise and assist the travel agent and tour operator:
- on proper practice on
the sale of travel insurance
to travel consumers.
- 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.
- in defending claims and
court proceedings brought by
travel consumers and travel
insurers.
Advise and assist the travel insurer:
- in drafting replies to
claims made by travel
consumers, and defending
applications to the Panel
and Court proceedings;
- in drafting and
modifying conditions and
exclusions, and travel
consumer notifications in
travel insurance policies;
- in pursuing claims for reimbursement against airlines, cruise lines, tour operators and accommodation providers.
