Even with Hurricane Dean taking aim at Cancun, Mexico, last August, Miguel Guillen wasn’t worried. After all, he had insured his vacation.
As the Category 5 storm threatened to blow away his hard-earned getaway, Guillen called his insurance company, Access America. A quick conversation left him with the impression that he’d get a full refund in less than two weeks. “I was told to cancel my flight and file a claim,” Guillen says.
Then the hurricane changed course, leaving Cancun unharmed. Guillen’s flight took off as scheduled, and Guillen’s claim was denied. “It was unfair and it was inappropriate,” says Guillen, a computer engineer from Seattle.
Guillen’s story isn’t that unusual. More travelers are buying insurance, and more are encountering the difficulties that sometimes ensue.
Before Sept. 11, about one in 10 Americans insured their vacations. Now, about one-third of all trips are insured, according to industry estimates. That translates into big profits for insurers. The U.S. Travel Insurance Association, a trade group, estimates that the industry rakes in about $1 billion in annual revenues. In the past year alone, the association’s membership rose nearly 40 percent, to 56 member companies.
It may be a good time to be in the travel insurance business, but is it a good time to buy travel insurance?
Depends. With so many travel insurance products available, thorough research is critical — and that means reading the policy in its entirety, not just the brochure.
For example, if Guillen had reviewed his Access America policy carefully, he would have seen that it covered him if his flight was canceled because of the hurricane – but not if he made his own decision not to go.
“His claim was denied because there was no disruption in service by the airline,” says company spokeswoman Caroline Platt. “His plane took off as planned.”
Access America, one of the largest travel insurance companies in the world, is concerned that Guillen and others like him may be left with the feeling that they are covered when they aren’t. The company has started simplifying the language of its policies through a campaign called “Plain English.” Platt described it as “taking the pen back from the underwriter’s hand” and using charts, tables and policies written in easy-to-understand language to clearly communicate what a policy does and doesn’t cover.
It may be that Guillen bought the wrong policy in the first place. At least that’s the assessment of travel insurance expert Zain Jeewanjee, chief executive of g1g.com, an aggregator of travel insurance products based in San Jose, Calif. A “cancel anytime” policy might have saved the day for Guillen. That type of policy would cost two to three percentage points more than the average policy, which usually runs about 6 percent to 8 percent of the cost of the trip.
For example, TravelSafe Insurance, based in Wyomissing, Pa., has what it calls a “Cancel for Any Reason” policy that offers up to 100 percent of a traveler’s nonrefundable trip costs in cash, depending on the amount of penalty assessed by the trip or tour provider.
So who needs insurance? The general rule is that a major vacation purchase — anything over $10,000 — should be insured. But the insurance industry prefers another measure: If you can’t afford to lose it, you should insure it.
This isn’t to say you should buy the first policy you find.
“The most basic advice I would give to someone looking to purchase travel insurance would be to ask questions,” says Rob Jordan, a regional sales manager for Travel Insured International, of East Hartford, Conn. And don’t wait. He says getting insured the day you book your trip ensures that you have the widest range of coverage.
Sounds simple, but in practice, it can be tricky. There are so many types of coverage, from trip interruption policies to products that include multiple components, such as medical evacuation, baggage coverage and collision damage insurance. How do you determine what you need? How do you know what you can afford to lose?
The only way is to read and research the policies, including the fine print.
Do your own research
Jim Crutcher, a retail sales trainer in Charlotte, N.C., carefully assessed the options before buying a policy for a cruise. He was disappointed with what he found. Like Guillen, he had a potential weather problem, and he was worried that a weather delay would tank his vacation. A close look at one of the policies under consideration revealed that the weather would have to “cause complete cessation of services of your (airline) for at least 24 consecutive hours” or the insurer would not pay on the claim.
“With the policy’s wording,” Crutcher griped, “I’m not sure we’re even covered.”
The services of a competent travel agent can help, but don’t rely on one exclusively. Agents can’t take the time to read every policy, and even though they take a commission of between 5 percent and 30 percent for the insurance they sell, they shouldn’t be expected to do your homework.
“Here in the United States, when we buy insurance, we throw the policy in the drawer and wait for something to go wrong,” said Dan McGinnity, a spokesman for AIG Travel Guard in Stevens Point, Wis. “And then when something goes wrong, we pull it out and ask, ‘Am I covered?’”
That’s not the way to go about it. You need to know the details of the coverage beforeyou buy the policy. If you don’t, you could end up like Faith Frank, a loan administrator from Horsham, Pa. She thought she was covered by the insurance recommended by her travel agent when she missed her flight home after a recent Princess cruise in Vancouver, British Columbia.
She had followed the cruise line’s instructions, leaving at 9:45 a.m. for a 1 p.m. flight, but there was a series of unforeseen delays. Having missed her flight, she had to pay $1,900 for two new plane tickets. Frank said she filled out the paperwork, but the company rejected the claim and directed her to Princess for compensation. The cruise line also turned her down.
“Princess said they could not control what conditions would be like once we left the ship,” she said. “They apologized and said they considered the matter closed.”
Persistence pays off
Frank might have had her claim honored if she’d known a little about the inner workings of travel insurance. For starters, most travel insurance companies have a formal appeals process for grievances. Sometimes the company doesn’t have enough information to make the right call. Sometimes it needs a little nudge.
Jeewanjee, the CEO at g1g.com, once phoned an insurance company that had rejected a customer’s claim, citing a pre-existing medical condition — one of the most common reasons an insurance company denies a claim. “I got on the phone with them and said, ‘Look, here are the real facts,’” he said. “And it worked. They honored the claim, which just goes to show you the importance of the human touch.”
Nor should you underestimate the importance of being persistent when arguing your case to a travel insurance company. The industry’s claim-denial rate is about 5 percent, meaning that the odds of being successful your first time around are pretty decent. If you get a denial, don’t be afraid to ask again.
Better yet, buy the right policy to begin with, and you’ll get a prompt refund for your missed vacation the first time around.
Where to buy insurance
* G1G Insurance Services: Lets you browse a selection of policies, from medical and trip insurance protection plans for individuals to group insurance. (1-800-257-7718)
* InsureMyTrip.com: Offers more than 100 plans from 18 insurance providers and also publishes useful tips about travel safety. (1-800-487-4722)
* SquareMouth: Offers online applications to help travelers “easily and instantly” compare all the major travel insurance plans. (1-800-240-0369)
* Travel Insurance Center: Offers Policy Picker, a tool that helps you compare travel insurance packages. (1-866- 979-6753)
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The advantage of purchasing “car” insurance or “home” insurance from one of many companies available, is that they all, more or less, offer the same *type* of coverage. If you get collision insurance from company “A”, it will be basically the same coverage as from company “B”. In other words, the insurance we are all used to dealing with has been somewhat standardized.
This has even happened (more or less) with car rental insurance…
Until travel insurance can standardize on offerings and pricing, they will be doomed to second class status.
Ed
web/gadget guru