Accidental Tourist

Canadians made 20 million overnight trips to the United States in 2010 and travel to overseas countries reached a high of 8.7 million overnight trips. Travel to overseas countries has increased 86.2% since 2002.¹ A recent survey suggests 37% of Canadians travel to the United States without emergency medical insurance² despite their intended destination being one of the highest medical cost jurisdictions in the world. Odd, given that next to home and auto insurance, travel insurance is the most important consumer insurance purchase for anyone who engages in travel.

Travel insurance is one of the few product lines in which both general insurers and life insurers compete against each other. There are short trip, long trip, snowbird, comprehensive, single trip, annual plan, group and individual products available through licensed intermediaries and travel agencies, Internet aggregators,

associations, transportation companies, banks, credit unions and others. Consumers can buy emergency medical insurance or a comprehensive product that includes trip interruption and cancellation insurance, baggage loss and coverage for other travel-related occurrences. They can buy across the kitchen table, on the Internet or through the grocery store with little or no human interaction.

POST-CLAIM UNDERWRITING

Typically, the product involves little or no underwriting. If individual assessment of risk occurs, it tends to be a self-underwriting process, whereby travellers respond to various categories of health questions on the application for insurance to determine eligibility and premium rating. The answers furnished by the applicant on the application are not investigated unless there is a claim filed. Dubbed “post-claim underwriting,” this common insurance approach to scrutinizing evidence of insurability in tandem with the typical travel insurance exclusion for unstable pre-existing conditions has attracted criticism from consumer advocates and some regulators.

The other side of the story is that the product does not lend itself to a lengthy, fully underwritten application process. The travel insurance industry has applied a degree of ingenuity to delivery of the product through the leveraging of every available distribution channel while maintaining premium rates at affordable levels. Behind the scenes, specialized expertise and processes have developed supporting the product through sale, customer service, travel assistance, claims handling, medical cost management, patient evacuation and repatriation and cost recovery from government health insurance plans. All of these functions are unique to the product. It may be difficult to appreciate that travel insurers maintain:

• facilities to provide 24/7 multilingual assistance services;

• preferred provider arrangements to ensure medical cost management;

• expertise to repatriate insured travellers to Canada and to ensure appropriate return travel and an available hospital bed at home;

• ability to make direct payments to providers so that insured persons aren’t out of pocket or unable to obtain care;

• systems to allow efficient and timely recoveries of contributions from government health insurance plans; and

• medical staff, including nurses and doctors, to liaise with health care providers in foreign jurisdictions.

REGULATORY FRAMEWORK

All of this occurs without any legal or regulatory foundation, recognition or assistance. A comprehensive travel insurance policy is part general insurance and part accident and sickness insurance. It is a hybrid not recognized as a distinct class of insurance.

As such, no part of the Insurance Act is dedicated to the parameters of the travel insurance contract³ and appropriate to the hybrid nature of the policy. Insurers simply must sort it out by fitting the product into often less-than-exact legislative pigeonholes. For example, an insured may find the fire insurance statutory conditions in their travel insurance policy because the policy covers baggage loss.

Licensing requirements are also devilishly complex. They vary between delivery channels and provincial jurisdictions, leading not only to confusion, but to ridiculous results. On a technical reading of Ontario’s insurance laws, for example, a travel agent can sell travel insurance having met the requirements set by the Travel Industry Council of Ontario. At the same time, a licensed insurance intermediary should hold multiple licences for both general and accident and sickness classes of insurance from the Financial Services Commission of Ontario or otherwise satisfy the Registered Insurance Brokers of Ontario (RIBO) requirements for travel insurance.

The Canadian travel insurance industry is sophisticated and evolved and serves a travelling public increasingly on the move. The industry does not need more regulation: for the most part, travel insurance is now regulated as both a general and an accident and sickness product in multiple jurisdictions with less-than-uniform approaches. It would make sense to recognize the coming of age of travel insurance as a fundamental product to the protection needs of Canadians by creating a distinct and uniform class of travel insurance. Presumably, this would be a starting point for lawmakers and regulators in moving toward a framework that is flexible and yields sensible, rather than sporadically odd, results.

END NOTES

1 International Travel Statistics Canada (2010).

2 Ipsos Reid & RBC Insurance 2008.

3 This is the case for general and accident and sickness insurance.