Regulators slam travel insurance industry over questionable practices

Complicated language and inadequate screening are causing potential gaps in policy holder coverage

Regulators slam travel insurance industry over questionable practices
In an issues report, insurance regulators have expressed concerns with the application and underwriting process for travel insurance policies, which could lead to a lack of coverage among policy holders.

Many Canadian travel insurance policies are sold without proper medical questionnaires and with dozens of pages of jargon that could easily confuse consumers, reports the Vancouver Sun. “Current practices do not appear to meet this objective [of providing enough information for consumers to make an informed choice about policies],” said the report prepared by a working group of the Canadian Council of Insurance Regulators, which includes BC’s Financial Institutions Commission (FICOM).

“FICOM is actively working with other regulators in Canada to address consumer concerns about travel insurance products sold locally and nationally,” said Chris Carter, deputy superintendent of supervision at FICOM, in an email to Postmedia News. The regulator group is preparing recommendations for a travel insurance industry clean-up that, if approved, would impact travel insurance for out-of-country travel across Canada.

According to the issues report, insurers are approving 95% of applicants for policies without determining whether their medical condition would exclude any eventual claim. “The working group … is surprised so few applicants have to undergo medical examinations during the underwriting process (compared to applicants for health and life insurance),” wrote the regulators, adding that the high acceptance rate “may give a false sense of security among consumers or create unrealistic expectations.”

This can be risky for travellers who are typically in a rush: they would choose their own coverage and determine whether they had a pre-existing medical condition. Compounding the problem is the length of a typical policy, which is filled with “medical questions that are too complicated for even medical experts to understand.”

The report gave an example of a young, healthy man applying for travel insurance who said “no” when asked if he had a prior medical condition. He didn’t realize that a case of chest pressure that he’d complained about two months beforehand, which his doctor chalked up to stress, should have counted as a prior medical condition. He got into a bike accident on his trip, and his insurer denied him coverage because he improperly answered the question.

Another case involved a woman asked to choose among 15 different plans, which were detailed over 85 pages’ worth of disclosure documents.

“The working group observed that the documents are often too difficult for the average consumer to read and understand,” the report said. “Insurers should carry out a diligent review of their (travel insurance) products to ensure they’re providing proper coverage to consumers.”

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