The cover your clients need

With more ways than ever to book travel insurance, there are still plenty of reasons why travel agents do it better, writes Kristie Kellahan.

It’s often said that people who can’t afford travel insurance, can’t afford to travel. That’s truer than ever, as the cost of premiums drop to record lows, thanks to the proliferation of budget policies and direct-to-consumer online providers. Many credit card companies even offer free insurance cover for customers paying for travel on their credit cards.

But what about those travellers with insurance who get into strife, only to discover their policy doesn’t adequately cover them?

When Jo Miller, a Sydney nurse, had her bag stolen on a beach in Majorca, she reported it to local police and even paid for their report to be translated to English. In assessing her claim for a stolen camera, the budget insurance provider deducted from her payout the cost of administration fees and a hefty excess. Jo was not amused when a refund cheque for 50 cents arrived.

Michelle Grima took out travel insurance before departing on a once-in-a-lifetime trip to Malta. While in Europe, her younger brother tragically died of a heart attack in Australia. Advised by the travel insurer that she would have to pay for expensive last-minute flights home for herself and her son, with no guarantee of reimbursement, she was heartbroken to miss the funeral.

Stories like Jo’s and Michelle’s are not uncommon, and anecdotally appear to be on the rise as more travellers book their insurance cover online or as a low-cost add-on when purchasing a flight or cruise. Travellers who rely on free cover from a credit card company may be surprised to learn of the many exclusions and limits that apply to claims.

Last year, Quantum Market Research conducted a survey on behalf of Understand Insurance, the Insurance Council of Australia’s financial literacy initiative. The survey found 19 per cent of travellers arranged their insurance through a travel agent, compared with 31 per cent who bought directly from an insurer and 20 per cent who had travel insurance through their credit card. Another 8 per cent used a price comparison website and 6 per cent of travellers bought their policy from an airline. Those in regional areas were significantly more likely to have purchased their policy through a travel agent (26 per cent) than to those living in metropolitan areas (17 per cent).

This downward trend of fewer clients arranging insurance through their travel agent is taking a big bite out of agents’ earnings potential, as most sales of insurance policies earn commission.

“There has been a massive shift in the past 10 years and it’s now a much more competitive market as consumers have so many more choices,” says Jan Musgrave, an independent, home-based travel agent. “Insurance used to be a huge part of travel agents’ business.”

Musgrave says the trend is “100 per cent” about the low- or no-cost cover that can be arranged online. But buyer beware: policies vary widely and many do not offer adequate coverage.

“It’s hard to put a value on insurance,” Musgrave says. “At the point in time you pay for it, it seems like a cost. But if circumstances arise that lead to you needing it, you’ll need it in spades and you’ll be glad you have it.”

Travel agents, with their expert knowledge and daily dealings with insurance providers are well-placed to advise on the most appropriate coverage and can help ensure travellers are not underinsured. They can ask questions about the policy, and know what to look for in the PDS (Product Disclosure Statement). They can also be a valuable point of contact if things go awry during a trip.

“Travel insurance is vital for anyone preparing to head overseas, where emergency medical bills can sometimes top $100,000,” says Campbell Fuller, spokesperson for Understand Insurance. “The Quantum Market Research found more than half of young Australians aged 18 to 29 incorrectly believe the Australian Government would arrange and pay to get them home in a medical emergency. This is not the case.”

Fuller says travellers should be advised to select a policy that covers the destinations they intend to visit and the activities they wish to enjoy on their trip. Riskier activities, such as sky-diving, riding a jet ski, horse-riding, skiing or bungee jumping, are not automatically covered by all policies.

Travellers and their travel agents should read the PDS for the full details of each policy’s features, limits and exclusions. Cover for personal belongings and luggage, for example, is generally limited to a specified amount, but can be increased by paying a higher premium. Policies may not cover claims made in countries where the Department of Foreign Affairs and Trade recommends against travel.

loader