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More Travel Insurance
Pitfalls
Selling travel and selling travel insurance go hand in hand.
But in recent years, travel agents have become hesitant when
it comes to offering travel insurance, because they believe
that legal restraints have put them in a peculiar and
difficult position.
With a better understanding of the legal pitfalls, travel
agents can confidently go about offering travel insurance.
“We must start with the fact that travel agents have a legal
obligation to recommend travel insurance to clients. Nor
does the legal obligation stop at handing over the travel
insurance “product disclosure statement” (the new name for
an insurance policy application) to clients, it goes
further” explains specialist tourism lawyer Anthony Cordato.
Under the Department of Foreign Affairs and Trade (DFAT)
Charter for Safe Travel, for which AFTA was first signatory
on 11 June 2003, agents are committed to “encourage
travellers to take out adequate travel insurance”. The
process isn’t always easy.
To ‘encourage’ travel insurance, the travel agent must
provide advice – what cover is recommended, what are the
requirements, what are the exclusions, to fit the client’s
circumstances and the travel destinations?
To give comprehensive advice on travel insurance, ASIC
requires the travel agent to hold an Australian Financial
Services (AFS) licence or be an authorised representative of
a licence holder. Many agencies have one person who has
trained and is an authorised representative. But most travel
consultants are not authorised representatives. How does the
travel consultant ‘encourage travellers to take out travel
insurance’?
Cordato, author of the book “Australian Travel & Tourism
Law”, says that the Insurance Ombudsman Service (IOS) has
recently solved this dilemma. In May this year, it published
a “Start Holiday” brochure. The brochure is a guide
to travel insurance prepared with the assistance of
Australia’s four major travel insurance underwriters. It can
be ordered from the IOS or downloaded as a PDF file from
http://www.smartraveller.gov.au/travel-insurance-ios.pdf
According to the IOS, the brochure was issued following a
massive 228% surge in the number of travel claims rejected
by insurance providers during the year 2005-2006. What this
statistic demonstrates is that the travelling public
desperately needs a proper explanation of the contents of a
travel insurance policy.
Insurance Ombudsman Sam Parrino described the 228% increase
as “very worrying”, particularly as it was accompanied by a
42.5% rise in the number of travel-related disputes. The
increase has created great demands upon the IOS in dealing
with these disputes.
The brochure focuses on the key words that potential
travellers should look for before taking out travel
insurance: excess; limitations; conditions and exclusions
with respect to luggage and personal effects, as well as
medical and health issues.
Cordato says agents cannot force clients to buy a particular
policy (the Trade Practices Act exclusive dealings
prohibition forbids that). But they can say to the client
“this tour or cruise has a requirement that you must have
travel insurance”. In many cases, a copy of the insurance
policy must be produced to the tour operator when the tour
commences.
“Nor can agents draw comparisons between the policy they
offer, and other policies, unless they are properly licensed
to do so.”
“But there is a fine line to be drawn here - an agent can
sell the features of their policy – such as unlimited
medical and hospital expenses, coverage for certain
pre-existing illnesses without extra premium and higher
values for lost or stolen cameras, laptops and valuables.”
You get what you pay for in travel insurance, Cordato notes.
“You can buy a cheap policy on the internet, but you’ll find
it doesn’t have the coverage, especially medical and
hospital that other policies have. Travellers are better off
with a more expensive policy offered through a travel agent
than with a cheap policy purchased on the internet.”
“The devil is in the detail. One example is that internet
policies often don’t cover skiing”, he says, “whereas
policies sold through travel agents often cover skiing,
snowboarding and sometimes scuba diving.”
“In travel insurance, the small print (ie the exclusions)
does matter.”
Consumers are often surprised to learn that some items may
not be covered by their policy. Standard exclusions are for
possessions stolen when left unattended in a public place,
electronic gear such as cameras, computers, mobile phones
and jewellery (unless the insured person is carrying or
wearing them), items left unattended in a motor vehicle
between sunset and sunrise and cash.
As Cordato points out the definition of a “public place” is
not what can be expected - a hotel foyer, a private beach or
private car park may all be treated as a “public place”.
Other insurance pitfalls relate to existing medical
conditions (particularly heart and respiratory problems) and
age. Some polices won’t cover travellers over 65, others
will do so, but require a premium. Most policies will not
cover travellers once they turn 80.
Likewise, automatic travel insurance through credit cards is
“not full travel insurance” and is often very restrictive.
In some cases it covers only the cardholder, or it may be
restricted to medical and death benefits only.
As a final word of advice, Cordato says agents are well
advised to ensure their clients sign an acknowledgement that
they’ve been offered travel insurance, whether the clients
take out the policy offered or not.
Note: this was the second in a series of five
interviews in which specialist tourism lawyer Anthony
Cordato discusses issues of vital importance to travel
agents.
Published with the kind permission of e-travel blackboard,
where the article was first published in August 2007, and
with the kind permission of Peter Needham |
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