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

© Copyright 2017 Cordato Partners