A businessman facing a risky missed connection.

Confusion, credibility and underinsurance: the rocky relationship between modern travellers and insurance

Anyone who travels in 2018 does so in an unprecedented way.

Today, Australians explore more and further afar than ever. Everywhere we venture we carry expensive gadgets to document and navigate our journeys. As we do, we’re ditching traditional transport and accommodation models in exchange for the convenience and value of things like Uber and Airbnb.

Naturally, the way travellers view their insurance is also changing. Just look at the most popular search queries for the subject:

  • “Is travel insurance necessary?”
  • “What is travel insurance and what does it cover?”
  • “Is it compulsory to buy travel insurance?”
  • “Does travel insurance cover Airbnb?”

While business travellers and older Australians still understand the importance of being insured in a foreign country, many younger people don’t see the value of travel insurance at all. Those who do buy coverage aren’t always aware of the risks they face overseas or the limitations of their policy. Many head off with no insurance at all.

A profound shift is taking place in the travel industry, and the travel insurance industry has been slow to respond. We must adapt to the new technological, business and social landscapes modern travellers roam through. If we don’t, new, dynamic insurance concepts will take over. Apps that insure household appliances for short amounts of time outside the home are already here. It’s only a matter of time before someone finds a way to make travel insurance digitally agile. When they do, traditional travel insurance may go the way of the traveller’s cheque.

Millennials don’t value travel insurance

At Alleviate Risk, one of my target markets is millennials. Among them, I’ve noticed a lack of desire to buy travel insurance and a lack of understanding of what it actually is. Like anything in life, when we don’t understand something we mentally steer away from it. It’s not hard to see why there is no perception of value among millennials. If they do buy it, they buy it online. To do that they’re forced to read complex terms and conditions by themselves. They go through all that rigmarole and then they see no appreciable result for it.

In 2016, the Insurance Council of Australia and the Department of Foreign Affairs and Trade worked together to conduct “The Survey of Australians’ Travel Insurance Behaviour” (SATIB). Here’s one startling result from the study: one-quarter of Australians who went overseas experienced an insurable event, but many didn’t take out any insurance at all. How many?

  • 8% of surveyed adults travelled overseas without insurance in the past 12 months
  • 31% had travelled without insurance in the past decade
  • 30% of travellers think you don’t need insurance if you’re visiting a developed country.

When asked why they didn’t get travel insurance, the top reasons were:

  1. Just hadn’t thought about it
  2. Uncertainty as to whether it was needed
  3. Travel insurance was too expensive
  4. Travellers were careful not to have an accident
  5. It was too much hassle

Look at numbers 3 and 5 again. As an industry, our customers perceive our product as too expensive and too hard to buy. Yet, nothing could be further from the truth. As an insurance broker with both professional and personal experience of what can go wrong for an overseas trip (I tore my calf muscle in half the night before a 10-day ski holiday), those responses are a worry. Not just numbers 3 and 5, but especially those.

I understand where they are coming from though and would like to bring an additional reason for their aversion into the mix: the public – particularly young people – is cynical about an insurer’s willingness to:

  1. Pay a traveller’s claims, no matter how legitimate it may be
  2. Insure a traveller’s activities, because travel these days is far less planned than it used to be.

Of course, I am a firm believer that you get what you pay for. If a policy is cheap and narrowly worded, you can bet your bottom dollar it will have a cumbersome claims process and more exemptions than you can poke a stick at. But air travel is so cheap and accessible these days. People duck off multiple times a year on a whim for shorter and more spontaneous trips.

Our industry isn’t catering well for this type of unplanned travel. And when the industry lags so far behind consumer behaviour, the result is a loss of business for the insurer, plus inadequate or non-existent coverage for the consumers. Everyone loses.

People care about their phones, a lot

A perfect example of the travel insurance industry’s inability to keep up with customer expectations is the way insurance for smartphones, tablets and other traveller gadgetry is provided.

Compare Travel Insurance recently investigated how 20 of Australia’s market-leading travel insurers deal with smartphone claims. Their research showed “travellers can expect to lose out on at least $500 if making a claim for an Apple iPhone purchased over 12 months ago for $799”.

Once an average excess of $107 and 50% depreciation are factored into the claim, a smartphone owner can expect to get $299 for their loss – less than half of what they paid for the phone.

Furthermore, even if travellers do purchase insurance, they may find themselves entitled to no payment at all if:

  • They are on a monthly phone contract instead of being an outright owner
  • They cannot provide the phone’s IMEI code after it is lost, damaged or stolen
  • They cannot provide proof of ownership of the phone, such as an original receipt
  • They have their phone stolen from an unattended motor vehicle.

To insurers who understand risk, all of these exemptions seem reasonable. To a customer who wants to protect their most prized travel asset, these limitations make them think: “Why bother buying insurance at all, I’m not going to be covered for anything I care about!”

And to the customer attempting to make a claim only to find they’re underinsured, the question becomes: “What did I actually pay for?!”

We must explain the value of travel insurance, personally

Answering this last question is paramount to travel insurers remaining relevant and useful. But with the SATIB finding 34% of travel insurance buyers use online search as their primary research method, personalising cover to a client’s needs is no longer cutting it.

With online sources like comparison websites leading the sales race, insurers don’t get a chance to assess their client’s risk profile and explain what the best options are. Clients meanwhile can’t access a human expert to answer questions and explain policy terms.

Instead, companies just email the customer a Product Disclosure Statement and ask them to tick a box saying they understand it. This type of sale often leaves consumers blissfully ignorant of:

  1. The risks they face overseas
  2. The limitations of the coverage they’ve selected.

The online purchase model that’s currently popular is not meeting client’s needs. The SATIB report found:

  • 58% of all travellers did not even look at their policy’s exclusions
    26% of travellers did not look at their policy document at all
    24% were not completely clear on what was covered by their policy.

As insurance advisers, our job isn’t to lump clients with the highest coverage possible. Our job is to work with travellers to explore their risk profile and use the information we glean to match the client’s needs with the right product.

This first step is critical because many travellers (particularly those under 30) have no idea what their risks are. They are not educated consumers, and therefore cannot possibly purchase the best insurance for their unique situation.

Modern travellers are dangerously unaware of the risks they face

The base level of understanding Australian consumers have regarding travel insurance is revealed by their widely held beliefs about what happens during an overseas medical emergency. The Australian government has no obligation to provide any assistance to its nationals, but despite this, the SATIB revealed that of 18-29 year olds:

  • 52% incorrectly believe that if an Australian has a medical emergency overseas the Australian government would arrange and pay for them to get home
  • 47% incorrectly believe that if an Australian has a medical emergency overseas, the Australian government would pay their medical bills.

This wishful thinking is not only incorrect; it’s dangerous – especially when you consider that 27% of the respondents were either not covered for medical emergencies or were not sure if they were covered.

Overseas medical emergencies are often incredibly complicated and can result in death or permanent injury if a plan for a swift rescue, transportation to an acceptable healthcare facility and access to immediate and adequate treatment is not put in place by an insurer.

Even if an injured traveller fully recovers, an overseas medical emergency can leave them in huge debt. Australians have a tendency to assume that other developed countries have healthcare billing systems that are similar to ours – not so. Only when clients hear that something as common as unanticipated appendicitis could cost them $55,000 in the USA do they begin to appreciate the importance of having the right cover.

Modern travellers want flexibility

In addition to convenient, transparent purchasing options, travellers are increasingly expecting the travel insurance industry will offer products using the mix and match approach some health insurers provide. Younger people, in particular, are less interested in paying for coverage for every possible risk they may encounter: they just want to be covered for the risks they know they’ll take.

“We’re seeing much more of that certainly from an interest standpoint, even somewhat generationally with younger travellers. They don’t want to necessarily purchase an entire package, they really just want singular benefits,” Jeff Rutledge, president and CEO of AIG Travel in Insurance Business Magazine.

Many young travellers don’t want to cover for acts of war, deep sea diving or natural disasters. They want to know they’ll be covered while riding in an Uber, or couch surfing or if they choose to make a last-minute booking.

It is these seemingly simple expectations that insurers must not only meet but be seen to meet.

The travel insurer who can convincingly communicate their willingness to cover a traveller who’s leaving next week, who’s going to stay in an Airbnb somewhere and will be using their expensive iPhone the whole time – that’s the company that’ll remain relevant. Why? Because they are giving people what they want.

To hear more about why we insurance brokers must offer the cover that enables travellers, especially business travellers, to make decisions and follow opportunities on the fly, get in contact with me: morgan.appleby@alleviate.insure. Let’s talk.