The “Concerning Survey Results” from the Australian Government website Smarttraveller this month shows that one out of six Australians did not have any insurance for their last overseas journey. Over 80% of travelers who have insurance did not read the policy product disclosure statement, which is essential to understanding what’s covered and what’s not.
Andrew Hall, CEO of the Insurance Council of Australia, stated that these results meant “Australians were putting themselves in danger” and that “personal responsibilities play a large part in your travel planning and it is important to read your policy details so you know you’re covered.”
Insurance companies do not always make their coverage easy to understand. The top-line payout numbers of travel insurance documents are often different from the exclusions and caps and other icebergs that lie in the fine print.
This issue was identified by the Australian Securities and Investments Commission last year when Allianz and AWP pleaded to false statements made about travel insurance from 2016-2018.
If you are buying or have a travel insurance policy, you should read it before departing, no matter how many pages of legalese you find.
Why the PDS is important
It may not be helpful to call and ask a potential insurance company questions. Guardian Australia called several travel insurance companies to clarify payment guidelines. Call center staff have given inaccurate answers on multiple occasions, which overstated the likely payouts. They also stated that their advice was general and only the PDS is legally binding.
Choice, a consumer advocacy group, recommends that you check:
- The table of benefits on the PDS summarizes your coverage.
- The section on the policy covers is divided into “what will we pay” and “what won’t we pay.”
- Exclusions general
- Preexisting conditions
- The table of word definitions.
- What you will need to claim your insurance
- The Covid-cover Section, and
- Information on emergency assistance is available 24 hours a day.
Remember the connecting flight time.
In the past 12 months, two in five Australians experienced a delayed flight or cancellation. This means that delays and missed connections will be a common scenario for many travelers.
You will need to contact the airline if it is responsible for the cancellation or delay. Airlines will usually offer you a credit or a rebooking at a later date. Customers with travel insurance can only claim if circumstances beyond the airline’s control caused the cancellation.
Many airlines do not provide reasons for delays or cancellations. You must then provide the airline with details of your request and give your insurer an explanation as to why these details were not provided. This may be difficult or even impossible.
Insurance companies also have different policies on the coverage of airline delays that are not caused by the airlines. Cover- More does not cover missed connections if there is a scheduled transit time of less than 90 minutes. This applies even if an airline has designed a more tight connection. World2Cover only covers claims for delays of more than six hours.
Most travel insurance policies will cover the additional costs of transportation and accommodations to allow you to catch up on your itinerary or make your pre-booked connections.
Avoid the exclusions for stolen luggage (and minimize your risk).
Make sure you read the definition of the word “unattended,” especially as it pertains to luggage that is stolen from cars or stowed on a train or at an airport. The item limits of different insurers for laptops and cameras are also other.
If you are planning a driving vacation, it is important to examine the details of luggage stolen from vehicles. Most policies require that the luggage be stolen during daylight hours from a boot or hidden storage compartment. There must also be forced entry into the car, and a police report must be filed. If a theft happens from an unlocked vehicle, and the luggage is in plain sight or the car overnight, then you won’t be covered.
You may also be able to get extra caps if your luggage is stolen from a car. Cover-More reduces the payment for stolen baggage to $2,000 for each vehicle minus any excess. With other payment options for stolen luggage, individual payments range from $5,000 to $25,000.
Travel insurance is much more affordable (in terms of the percentage of premiums paid that goes to paying claims) than other types of insurance, such as car or contents insurance. According to a review conducted by the European Insurance and Occupational Pensions Authority, for every EUR100 invested in travel insurance, the average total payment was only EUR14. Loss ratios for home or car insurance are usually between 60-75%.
This can be partly explained by the higher costs of administration, limited underwriting, and the large number of on-sellers who earn commissions (think Flight Centre and Qantas), but caps and exclusions are also important.
Preexisting conditions: Be cautious
In general, it’s best to declare any preexisting conditions before purchasing travel insurance. However, this may increase your rates or prevent you from getting insurance at all. If you have lost luggage or a delayed flight, your insurance may cover it.
It is not only confusing for pregnant women but also for older travelers who may have multiple medical conditions. The number of weeks that insurance companies allow for coverage by pregnant travelers varies. Assume that their business is to limit payouts.
Preexisting conditions can be anything you have experienced or are aware of, including health problems. Travel insurance will not cover these conditions unless they are declared for evaluation or appear on a list of preexisting medical conditions that most insurers cover. Be sure to read all the conditions and the PDS.
You will not be covered if, for example, you don’t declare that you are wearing a stent in your heart and then have a stroke while traveling.
Some policies do not cover anyone over the age of 80. Some policies charge more for “older” travelers, who can be as young as 50.
Some insurance companies adjust the price and coverage of their policies based on a traveler’s destination. Some travel insurance companies are reluctant to cover travelers with preexisting conditions, for example, if they’re traveling to the United States due to their high medical costs or to other countries that have limited medical facilities.
Mental illness is also covered differently by policies. Choice reports that many travel insurance companies won’t cover hospitalization, medication, or missed travel due to a mental illness. Some insurers will cover you if a mental condition is declared as a preexisting condition, and a higher rate is paid. Insurance companies are unlikely to cover a claim for mental illness if the condition was not disclosed and is preexisting.
You can expect the same rigors if a family member has a preexisting medical condition. Check the definition of an “immediate member” too.
Consult a doctor (and be prepared to pay more if you have Covid)
Cover-More is the first Australian travel insurer to offer Covid coverage. The company has added a $500 deductible to reimbursements when travelers contract Covid-19.
World2Cover only offers COVID coverage with the most expensive policy. The policy covers unlimited hospital and medical costs abroad, plus $3,500 for each adult in additional Covid expenses.
Insurance companies will not cover travel delays caused by pandemics or general lockdowns in the countries to which you plan to travel.
A positive Rat test is not sufficient to claim.
It all boils down to reading through your insurance company’s PDS, asking lots of questions, and keeping detailed records of the answers you receive in case you need to dispute a claim later. If you purchase insurance, you should hope that you never have to use it.
Who will you call?
- Zurich Insurance Group underwrites the travel insurance sold by Cover-More. It is distributed also through Medibank, Commonwealth Bank NRMA Flight Centre, Travel Associates, and Commonwealth Bank. Call centers are located in Australia and overseas.
- World2Cover also offers travel insurance through state car associations (except NRMA), and their call centers are located in Australia.
- AIG Australia underwrites the travel insurance provided by Qantas. Qantas’ travel insurance call centers are located in Australia. AIG’s call centers are located offshore.
- Allianz underwrites travel insurance sold through Westpac and ANZ credit cards, as well as NAB. Allianz’s call center is located offshore.