The Australian, Wealth
TRAVEL insurance is one of those products that few travellers pay attention to, whether they are begrudgingly buying a policy or relying on cover provided through top-end credit cards.
For that reason, travel insurance remains one of the most complained about financial products in Australia.
“It’s about 18 per cent of all our work for what would be a small partner in the insurance portfolio,” insurance industry ombudsman Sam Parrino says.
“That is a lot of work for us.”
In the first half of 2007 there were 2,574,787 travel policies issued, which amounted to about 8.5 per cent of all insurance policies on issue, according to the Insurance Ombudsman Service.
There were 169,329 claims made and 14,713 rejected by travel insurers, 8.6 per cent of the total.
While these figures sound large, the good news is that fewer claims are being rejected than in 2006, which saw a 228 per cent increase in travel insurance claims.
Parrino says the reason for the large increase in 2006 was that few people pay attention to what they are buying and insurers were strict in their enforcement of the rules in a year that saw a large number of unforeseen political and weather events.
“Travellers need to play a more important role in the pre-sale discussions,” he says.
“They should be more demanding of insurers and their agents in saying, ‘why should I buy this product?’.”
One of the major choices facing travellers is whether to buy a tailored policy or instead to rely on what is provided by a gold or platinum credit card.
A recent study by financial services researcher Cannex identified 104 cards in Australia offering travel insurance.
It compared what was on offer from American Express and the four major banks with leading insurer NRMA.
Credit-card policies do get a bad rap, mainly because people take the policies for granted and don’t check on the fine print.
“Most of the anecdotal and empirical information we are getting comes from the actual cases and that’s how we know that credit-card insurance policies, whilst they have their value, are generally mass-marketed and there is extremely general application,” Parrino says.
“The question is, are you buying a product as suited for you or are you buying something which is suiting some large demographic?”
But based on running two scenarios – a single person and a family of four travelling – Cannex found that the insurance offered by credit cards was worthwhile.
“Based on the scenarios than we ran, the free travel insurance that is being offered by the credit cards is actually comparable to the top of the range in standalone (travel insurance) products,” Cannex senior financial analyst Harry Senlitonga says.
“In the end, the main difference between buying a standalone product and credit-card insurance is that you need to make sure you are covered.
“When you buy a standalone product it is based on what information you tell the insurer, where you are going and the type of coverage.
“Some people who have the credit cards with free travel insurance take it for granted and don’t check.”
Naturally, the banks have a rosy view.
“It is really good value and really easy,” says Stephen Karpin, executive general manager credit cards at the Commonwealth Bank. “You don’t have to go and buy travel insurance separately every time.
“It’s a fantastic value feature of cards for anyone who travels.
“It depends what product you have got but really the key thing is to make sure, if you want to activate your insurance, to pay for your travel with your credit card.”
For the Commonwealth Bank, that means at least 90 per cent of the cost of the travel ticket must be paid for on the card.
Although most bank credit cards have their policies written by Zurich, they all have different conditions.
Cover yourself before you travel
To be sure, it is safest to pay for 100 per cent of the trip on a card.
The next question is: “Who is covered?”
Universally, cards will cover a couple. But definitions become more tricky on dependents, according to Senlitonga. Children under 21 living with parents are classified as dependents.
“Some of them have different definitions,” he says.
“If you live in a different house you are not classed as a dependent any more. Some of them cover children up to 25 years old as long as they are still students and live in the same house.”
The reality is that most policies offer similar benefits but there are a few quirks.
There are variations in the period of time insurance policies cover varies. A return fare bought with a Commonwealth Bank Gold card gives three months cover, while a platinum card provides 12 months.
A one-way ticket, however, only covers the cardholder for a month.
The American Express Platinum card covers 180 days consecutively and 183 in a year, while the ANZ Gold covers four months and the ANZ Platinum six months.
Incidents must be reported within 24 and 48 hours respectively with NAB and American Express while ANZ, Commonwealth and Westpac give 30 days.
Cannex’s Senlitonga says the other element to watch for is vehicle insurance excess cover. The four major banks provide it, as long as the car hire is paid for on a card, while American Express doesn’t. This feature can save about $20 a day on car hire.
The reality is that travel insurance is a fact of life for the prudent traveller.
“Travel is fraught with danger all over the place and I think people have got to understand, unfortunately, bad things happen and they need to be covered for it,” Parrino says.
“People have got to expect that they may need to call on their travel insurance as distinct to buying it simply because their parents have been nagging them to take it out.”
He recommends people call their bank and insurance company and ask specific questions about the trip being planned.
Most banks have a product disclosure statement document on their websites covering all the conditions, or they will respond to telephone inquiries.
“The provision of travel insurance as a reward for buying a travel ticket using a credit card is an incentive as much as anything else,” Parrino says.
“It’s not on providing a full-blown protection policy for you.
“To do so would make it more expensive. It’s the old classic case of you get what you pay for.”