Citing growing concerns over public confidence in Canada’s travel insurance market, the Canadian Council of Insurance Regulators (CCIR) has published an issues paper which reviews product design and market conduct practices in the industry.
On July 4, CCIR announced the beginning of a public consultation on travel insurance in Canada. The organisation believes that "there is a potential for misalignment between consumer expectations and industry practices for travel insurance" and the paper is meant to help it determine what needs to be done to improve consumer protection and confidence.
One of the CCIR's concerns is that there does not seem to be standard travel and health insurance (THI) products. The CCIR working group that put together the issues paper points out that insurers often combine various types of coverage in order to create “plans” available at different levels (e.g., basic, general, superior, etc.) which may be offered under a single-trip plan, a multiple-trip plan or both.
Complexity may be an obstacle
"The Working Group believes that the complexity of the design of some THI products can be an obstacle to the consumer’s ability to fully understand all available options and relevant limitations," reads the paper.
Terminology and definitions also pose difficulties. While consumers tend to think of travel insurance as a homogenous product, the paper notes that the market is very diverse and insurers offer a wide range of products. "The Working Group noticed that key terms and conditions used in these products lack standardized definitions and terminology. The vocabulary and definitions seem to vary not only from one insurer to another but also from one product to another offered by the same insurer," says the CCIR.
Underwriting under scrutiny
Another problematic area is underwriting. An earlier survey of travel insurers found that 95% percent of the products that were sold in 2014 were accepted automatically, without any additional underwriting apart from the general medical questions posed on the application form. "The Working Group considers this to be an exceedingly high automatic acceptance rate and is surprised that so few applicants have to undergo medical examinations during the underwriting process," says the CCIR.
Then there is the question of exclusions, restrictions, and limitation clauses. The CCIR is concerned that consumers might not be in a position to understand how key conditions and exclusions may affect their eligibility or suitability to a given travel product, and suggests that it might not be fair to apply such clauses without providing proper informational or educational material to clients and prospects.
Exclusion, restriction and limitation clauses
"How could the industry improve consumers’ awareness about and understanding of exclusion, restriction and limitation clauses, especially pre-existing medical conditions?" asks the issues paper.
These are just some of the issues raised in the paper. The complete document is available on the CCIR web site. The consultation period will last for 90 days, and the deadline to provide written submissions is September 30, 2016.