With growing concern over the complex nature of the Canadian travel health insurance (THI) market, the Canadian Council of Insurance Regulators (CCIR) has published an issues paper and opened up a three-month comment period for the public to share their thoughts.
“Canadians rely upon travel health insurance to protect them from financial hardship when travelling outside the geographical boundary of coverage of other insurance they hold (e.g. provincial health insurance plans),” the CCIR said. “Growing concerns…have been raised over public confidence in Canada's travel insurance market, which led the CCIR to believe that there is a potential for misalignment between consumer expectations and industry practices for travel insurance.”
One of the CCIR's concerns is that there does not seem to be a set of standard travel and health insurance (THI) products, so consumers aren’t sure what they are purchasing, and what is covered. Canadian insurers often combine various types of coverage in order to create tiered plans available at different levels. In addition, these plans may be offered under a single-trip plan, a multiple-trip plan or both.
A working group from the CCIR has spent the past 20 months examining everything from product design, to marketing and sales practices, involvement of third party service providers, claims management, complaint handling, consumer and seller education and data collection.
Travel insurance is provided in Canada predominantly through three main distribution channels, credit cards, licensed agents and travel agents/other exempt sellers.
Christine Chilton CTM, Director of Education for the Association of Canadian Travel Agencies, is part of a working group within the Travel Health Insurance Association (THiA), and has read the full report. She said the association was “pleased” to see the CCIR evaluated “the full spectrum of Travel health Insurance from the products, terminology, definition, marketing, distribution channels, claims, complaints and education.” She said ACTA expects to comment on the report, and is evaluating how it “can best contribute to the process in the best interest of our members.
In the past, she noted, ACTA has pointed out “that there are issues and gaps related to the sale of travel health insurance in Canada through the differing licensing regulations within each province. If you are a consumer buying travel insurance through a trained, travel professional, you can expect them to be up to date on the details of the terminology in your plan.
“The purchase of Travel Health Insurance should be easy and transparent for the consumer, to know exactly what coverage is available in case of emergency.”
Lengthy review details how Canadian travel insurance works
CCIR Members conducted a survey in 2015 to obtain information from regulated insurers about insurance products sold in Canada. The survey was sent to 241 insurers and was designed to gather information on their ten main travel insurance products for the 2014 calendar year.
There were 33 insurers and financial groups who offered products to Canadians in 2014, responding to the survey. About two thirds offered their products in all of the Canadian provinces and territories. The survey identified that there were 614 individual and 170 group THI products on the Canadian market in 2014
The survey focused only on the ten main products listed by each insurer, or approximately 145 individual insurance and 101 group insurance products which generated about $839 million in gross written premiums (net of voids) in 2014.
Through their research, the CCIR learned that claims were made on about 2% of the total number of policies/certificates issued. Approximately 7% of those claims were denied and approximately 50 percent of the total premiums paid out in benefits.
The leading reason for claim denial was the policy didn’t cover the claim. “However, the survey results did not provide sufficient details to allow the Working Group to identify specific situations or circumstances to explain denials based on this motive,” the CCIR said. The second reason for claim denial was “exclusions”, either for pre-existing conditions or other exclusions.
“THI products can be complex for consumers to understand, depending on the nature of the product and the type and situation of the consumer involved,” CCIR said.
The CCIR is also concerned with the relative ease that travel insurance purchasers are approved for a policy. An earlier survey of travel insurers found that 95% percent of the products that were sold in 2014 were accepted automatically, without any additional underwriting apart from the general medical questions posed on the application form. "The Working Group considers this to be an exceedingly high automatic acceptance rate and is surprised that so few applicants have to undergo medical examinations during the underwriting process," said the CCIR.
Complex terminology, bundling and fine print confound consumers
Canadian travel insurance products also suffer from complex and sometimes obscure terminology and definitions, the working group said. Also, sometimes these definitions and terms are different from one insurer to another.
Then there is the question of exclusions, restrictions, and limitation clauses. Key conditions and exclusions may affect consumer eligibility and whether a specific product is even suitable for them. The CCIR cited how lengthy some product descriptions can be, upwards of a 100 pages, and how policies often cross reference, adding to the confusion.
Another concern is the industry practice of bundling products together. “Considered separately, THI protections are not excessively complicated but when offered in bundles they become more complex since they include several types of coverage (medical or non-medical) which are usually subdivided (emergency medical care, hospitalization, ambulance cost etc.),” said CCIR.
A single product will often present several plans (basic, general, superior, etc.) to choose from, CCIR said in their issues paper, and each of these plans may be offered under a single-trip plan, a multiple-trip plan or both.
“In these cases, insurers present modular clauses in the policy or certificate so that it can be adapted to different plans. In addition, each of the coverage may have its own effective date, exclusions, pre-existing medical conditions, etc.
Different plans often target different categories of consumers, based on their age and trip duration. The CCIR noted how “eligibility conditions and protections included will change according to the consumer’s age and trip duration.”
The issues paper is available on the CCIR web site.