The most serious consequence of being sold inappropriate travel insurance is for those consumers who have pre-existing medical conditions. Over half of all holidaymakers (53%) who bought their insurance with their holiday were not asked about the state of health of those travelling.
NEWSTREAM — Around 8.5 million holidaymakers1 are potentially being sold inappropriate travel insurance as travel agents and tour operators continue to spend little or no time discussing the customer’s insurance needs says Direct Line Travel Insurance in a new report published today (Thursday 30 May 2002).
Unless better regulation of the way insurance is sold with a holiday is enforced holidaymakers will continue to pay a high price, not just at point of sale but also when they need to make a claim and find they don’t have the protection they thought they had.
Now, in their Tourist Trap report, Direct Line is calling for a new regulatory approach that deals effectively with insurance sold by travel agents and tour operators and puts an end to the range of other anti-consumer practices that are currently costing consumers millions each year.
Around two thirds of all travel insurance (64%) is sold with a holiday by travel agents or intermediaries2, many of whom are not experts in selling travel insurance. Recent MORI research commissioned on behalf of the insurer, shows that three quarters of holidaymakers (75%) spent five minutes or less discussing their requirements when arranging their insurance with their holiday, with almost a fifth (18%) simply being referred to the back of the brochure.
The most serious consequence of being sold inappropriate travel insurance is for those consumers who have pre-existing medical conditions. Over half of all holidaymakers (53%) who bought their insurance with their holiday were not asked about the state of health of those travelling. Of those who were asked about their health of those travelling, a third (33%) were not asked to identify specific conditions.
Furthermore, insurance sales provide a highly lucrative market for the travel agents and tour operators with around 30-50% of the total premium taken in commission2. This means that the cost of their insurance can cost up to three times more than buying direct3. Direct Line/MORI research1 showed that over 1 in 5 holidaymakers (22%) thought that travel agents and tour operators should not take any commission at all when selling them a policy.
Other anti-consumer practices identified in Direct Line’s report include:
* Making insurance a condition of accepting the holiday booking leaving consumers with no choice but to buy the insurance or risk losing their holiday.
* Presenting travel insurance as part of the holiday package with some operators going as far as automatically adding the cost of the insurance to the holiday.
* Charging significantly high cancellation fees that are unjustified when compared with other European countries.
* Failing to inform consumers of their statutory rights and the alternative option of transferring a holiday into someone else’s name rather than cancelling altogether.
Grouping all these practices together, it is clear that thousands of holidaymakers are getting a raw deal.
Tony Chilcott, Business Manager at Direct Line Travel Insurance said, ”Travel insurance is there to protect the consumer, to provide help and assistance when things go wrong. Unfortunately too many holidaymakers find that their insurance policy fails them when they need it most, leaving them stranded and having to foot the bill.
“Insurance sold with a holiday has been allowed to flourish because of a lack of regulation or stringent monitoring. Unless tough action is taken by the Government and other relevant bodies and a review of these anti-competitive practices carried out, thousands of holidaymakers will continue to pay the price.”
1 In March 2002 Direct Line commissioned a MORI survey of 905 holidaymakers who arranged their travel insurance with a holiday in the last 12 months. The research showed that 75% of holidaymakers spent 5 minutes or less discussing their insurance requirements. According to Mintel 2002, 21 million adults take a trip abroad each year, and 18,060,000 of those are insured. 64% of travel insurance is sold by travel agents and tour operators and given that 75% of those did not have insurance explained to them in detail, 8,668,800 are possibly being sold inappropriate insurance.
2 Mintel Report on Travel Insurance 2002
3 Prices based on Direct Line premiums as at May 2002.
Printed in Volume 1 Issue 10