Regulators cast critical eye on travel insurance

Report flags use of complicated jargon, lack of proper medical questionnaires

Many travel insurance policies are sold in Canada without proper medical questionnaires and with dozens of pages of complicated jargon, potentially leaving policy holders with no coverage, according to an insurance regulators’ issues report obtained by Postmedia News.

“Current practices do not appear to meet this objective (of providing enough information for consumers to make an informed choice about policies) and, as such, do not treat customers fairly,” states the issues report prepared by a working group of the Canadian Council of Insurance Regulators, which includes B.C.’s Financial Institutions Commission.

Based on this report, the group is preparing recommendations for Canadian travel insurance providers to clean up their industry after finding cases of what could be unfair practices.

Chris Carter, deputy superintendent of supervision at FICOM, said in an emailed response that “FICOM is actively working with other regulators in Canada to address consumer concerns about travel insurance products sold locally and nationally.”

The working group’s recommendations, if approved, would affect travel insurance sold for out-of-country travel in B.C. and across Canada.

The issues report listed a string of problems with travel insurance, including that 95 per cent of applicants were being automatically approved for policies without the insurer determining whether their medical conditions would exclude any eventual claim.

“The working group considers this to be an exceedingly high automatic acceptance rate and is surprised so few applicants have to undergo medical examinations during the underwriting process,” unlike with applicants for health and life insurance. The automatic acceptance “may give a false sense of security among consumers or create unrealistic expectations,” the report stated.

That would leave the consumer, who the report noted is often in a rush to get a policy before a trip, to choose the coverage and to determine whether they had a pre-existing medical condition. They would be left to read through lengthy policies with “medical questions that are too complicated for even medical experts to understand,” the report said.

Also, the premiums are based on the duration and value of the trip and the applicant’s age, rather than their medical condition, the report noted.

One of the examples the paper gave was of a young, healthy man who answered no when asked if he had a prior medical condition. But two months before taking out the policy, he had gone to his doctor complaining of pressure in his chest. His doctor performed tests and concluded it was likely due to stress.

The man was denied coverage for a bike accident on his trip because under the terms of his contract, he should have answered yes. His insurer ruled that he wasn’t eligible for the insurance in the first place because he had answered the question improperly.

Another example the report cited was a woman who was offered a choice of 15 plans, with disclosure documents that ran 85 pages.

“The working group observed that the documents are often too difficult for the average consumer to read and understand,” the report said. “Insurers should carry out a diligent review of their [travel insurance] products to ensure they’re providing proper coverage to consumers.”