Travel insurance should be sold on the basis of what it actually offers, not how cheap it is

The first thing a traveller might decide to leave behind in the current economic climate is their travel insurance – seen by many as a grudge purchase they will never use.

But do consumers understand travel insurance: what it is designed to provide and what it actually does provide? Recent consumer research by AXA found that about 20% of skiers and snowboarders didn’t even realise that under most policies they would be covered for injury or repatriation.

It’s a contrary world. While new policies are introduced for the savvy skier to include issues such as lack of snow or too much rain, some consumers don’t even realise the basics of cover.

About 30% of skiers or boarders are likely to make a claim at some point, usually for injury. A quarter of them claim to have suffered some sort of injury while on holiday and, as all travel insurers know, the costs soon escalate. Evacuation from the slopes, an operation and an air ambulance home from Austria can easily hit £25,000. And for visitors to America or Canada, the costs may be four times as much.

In 2009, the number of overseas holidays fell by 15% and travel insurance premiums fell by about 9%. The volume of claims also reduced – but the cost of claims continued to rise. About 10% of people opted not to take any travel insurance cover at all.

The problem is the way travel insurance is sold (or not sold, as in the case of policies that come free from banks and others). Consumers don’t realise that the cheapest policy may not provide the sort of cover they need. A travel insurance policy is not a catch-all protection, as the volcanic ash crisis proved.

Over the past year, we have seen some worrying trends. Medical costs have increased by about 13% and consumers generally have no idea what the actual cost of their treatment may be – a simple ear infection may cost £300. This reinforces the importance of disclosing pre-existing conditions and a growing need for screening in certain circumstances.

Misunderstandings about the European health insurance card are also common. The card covers public facilities only, is often not accepted in Spain and will not cover repatriation.

Fraud is on the increase. Increasingly, we see clinics and hospitals advising customers it is medically necessary to have surgery overseas when it can easily be done in the UK. Destinations are the issue here – Turkey may be cheap but it has one of the worst records for clinical fraud. Bills are set at levels clinics think they can get away with rather than what treatment costs.

And this summer’s big holiday trends – balcony jumping or bus jumping – have resulted in severe injuries and much consternation among consumers when they realise they are not covered.

The problems that resulted from volcanic ash last spring encouraged consumers to wise up to the potential pitfalls of travel insurance cover. More people are now better disposed to thinking carefully about the cover they are buying.

So the time is right to make a change – and encourage our customers to realise that they get what they pay for. Then we can start to sell the product based on what it covers, not on price. IT

Mike Keating is managing director of Personal Lines Intermediary