Beware "Illusory Benefits"
11 February 2013
Beware "Illusory Benefits"
Kiwi travellers are being urged to check their travel insurance policies to avoid paying for “illusory” benefits.
Leading provider Southern Cross Travel Insurance (SCTI) says some companies offer benefits that distract travellers from the cover they are far more likely to need.
“For example, a number of insurers are offering personal liability cover in the millions. But in more than 30 years of underwriting travel insurance, SCTI has never had a personal liability claim in excess of $100,000. Furthermore, claims under this category are extremely rare, with SCTI receiving only a handful of personal liability claims each year,” says chief executive Craig Morrison.
On the other side of the coin, many consumers have been left exposed in recent years as their policies don’t provide enough cover for travel delays.
“After the 2010 and 2011 volcanic eruptions in Iceland and Chile, a lot of companies reduced their travel delay maximum limits to only $1,000 or $2,000 - nowhere near enough for such major events. Our customers who were stranded in Europe claimed on average $500 a day - for those stuck in Paris, it averaged $1,000 a day. Without a policy like ours, they would have been paying out of their own pocket within a couple of days.”
Morrison says SCTI’s leisure travel policy TravelCare provides comprehensive cover – “we provide for a maximum of $30,000 of cover or 30 days delay, whichever comes first”.
He says another hook travellers need to be wary of is the need to purchase “add-on” modules in order to be covered for certain activities.
“In August last year, there was a highly-publicised case where a Kiwi travelling in Thailand racked up over $80,000 in medical and evacuation bills because his travel insurance policy did not provide cover for riding a scooter. He believed he was covered but it turned out motorcycle and moped cover had to be purchased as an add-on. We believe it’s fairer for consumers to have one simple, all-encompassing policy, rather than a plethora of confusing options designed to make the policy appear cheaper.”
SCTI continuously analyses the types of unexpected events that impact its customers to ensure its policies provide sufficient cover and useful benefits at an affordable price. In the last financial year, the direct-to-consumer insurer provided cover for more than 300,000 travellers in New Zealand and Australia.
“We design our benefit limits to cover the vast majority of overseas holiday incidents, whether it’s flight delays caused by snowstorms or volcanoes, nasty infections from a coral scratch, rental car dings or getting mugged. It is extremely rare for our customers to run out of benefits,” says Morrison.
However, a recent survey found, in the year to June 2012, 31% of Kiwis did not take out travel insurance when heading overseas – the most common reason being they were “happy to risk not being covered”.
Morrison says that approach doesn’t stack up financially, especially with travel insurers offering very competitive prices at the moment.
“The reality is the unexpected can happen to anyone, anytime – even if all you are doing is visiting your brother in Australia. Travel insurance is particularly worthwhile for covering unexpected medical and evacuation costs which can quickly climb into the tens of thousands of dollars, or even more. If you’re in the US, Europe or somewhere more remote, you could be looking at a bill in the hundreds of thousands.”
In 2010, for example, SCTI paid a claim for a traveller in the US who incurred nearly $1 million in medical expenses alone.