Look before you leap on travel insurance fine print

Online insurance can save you plenty but check the fine print, writes Jane E. Fraser.

Alex Milner-Smyth was shocked when she was quoted about $1500 for travel insurance to cover a four-month overseas trip. Shock turned to bewilderment when online providers came up with quotes of about $300 to cover the same trip.

Were the "suspiciously cheaper" internet prices too good to be true, or was the $1500 quoted by two different travel agents an excessive amount to pay?

Travellers are increasingly turning to web-based providers in search of cheaper travel insurance options - just as they have already done with accommodation, flights and most other travel components.

An avalanche of new online providers has turned the travel insurance industry on its head, with promises of massive savings on travel agents' prices. Travel insurance has traditionally been a lucrative earner for travel agents, with a typical 40 per cent to 50 per cent commission on policies, compared with about nine per cent on international air fares and 10 per cent on holiday packages.

Online providers argue that by cutting out the agent, they can pass on savings to consumers.

The Australian Federation of Travel Agents (AFTA) is so incensed by the language being used in advertisements that it is pursuing a complaint with the financial services regulator.

The chief executive of AFTA, Jayson Westbury, says agents' pricing of travel insurance has changed dramatically in recent times and online providers must be made to substantiate claims such as being "up to 50 per cent" cheaper than travel agents.

In the case of Milner-Smyth, the travel agents argued that the $1500 policy would provide better cover, but she decided to do her own research and came to the conclusion that the travel agencies' prices were "massively inflated" by commissions. Milner-Smyth, a recruitment consultant, says she found insurance policies "exceptionally hard to compare" but found an online policy for about $300.

She is now preparing to take off to Africa, Britain and the US with the $1200 difference to put towards her trip.

Insurer AAMI, which is one of the companies under fire from AFTA, says it stands by its claim that its customers can expect to pay about half of what they would pay for a travel insurance policy from a travel agent.

"Travel insurers pay high commissions to travel agents to sell their products," says the national operations manager for AAMI Travel Insurance, Heather McDonald.

"By dealing direct with AAMI, customers can effectively cut out this middle man." Online provider Travel Insurance Direct is claiming a boom in business from older travellers trying to avoid expensive age-based premiums. The general manager, Ian Jackson, says policies available through travel agents are typically twice the price of online policies for travellers aged 60 and over.

"Travellers are routinely being told they need to pay hundreds of dollars more than they should, simply because of their age," Jackson says. "Others are being charged extra for pre-existing medical conditions that are relatively routine and should be covered for no additional cost."

While there are few who would dispute that online policies are cheaper, it is fair to question to what extent consumers are equipped to make informed decisions about travel insurance policies. Most insurance products are sold with the advice and guidance of an agent who is trained to ask the right questions and point out any exclusions and required declarations, while those booking travel insurance online are left to read the fine print.

Jason Westbury predicts there will be an avalanche of problems if travel agents are cut out of the equation. If travellers incorrectly fill in application forms or fail to take out the appropriate level of cover, they might find trouble when trying to make a claim.

Westbury says consumers cannot be blamed for taking up cheaper policies, particularly when new entrants are selling them at "loss leader" prices to buy market share, but says "the underlying message is buyer beware".


When booking your own travel insurance, ask yourself:

1. Are you booking the recommended level of cover for your destination?

2. Are you covered for unlimited medical expenses, including repatriation to Australia?

3. Have you declared any

pre-existing medical conditions?

4. What is the excess on the policy?

5. Are you aware of any exclusions on the policy, such as civil unrest or adventure activities?

6. Have you checked the government travel advisory (smartraveller.gov.au) for your destination and whether it may affect your insurance cover?

7. Do you need to take out extra insurance cover for more expensive items such as jewellery, laptops or camera equipment?

8. Are you covered for the resumption of your trip if it is interrupted by an unforseen event, such as a death in the family?