The Canadian Council of Insurance Regulators (CCIR), the umbrella group of Canadian provincial insurance regulators, recently released a position paper outlining proposals for enhanced consumer protection in the design and delivery of travel health insurance ("THI"). This article considers the findings contained in that position paper, "Travel Health Insurance Products" (the "Position Paper") in the context of the submissions of industry stakeholders (the "Stakeholder Submissions") during the consultation phase that followed the CCIR's publication of its preliminary views on THI issues in 2016 (the "Issues Paper"). In a related development, the Travel Health Insurance Association of Canada ("THIA"), the Canadian THI industry association, recently released a new Travel Insurance Bill of Rights and Responsibilities, which is also discussed below.
Travel Insurance Overview
Travel insurance is a somewhat unique product in the Canadian insurance marketplace, as it is:
underwritten by both life and property and casualty insurers;
typically a hybrid of certain health-related coverages and certain property loss-related coverages and is available in a variety of durations and product bundles;
obtained through a wide variety of channels, including insurers, brokers/agents, travel agents, travel companies, banks, employers and embedded in credit cards;
typically approved automatically or nearly automatically, with "underwriting" only occurring in the event of a claim; and
subject to patchwork of unharmonized regulatory regimes across the country.
The Position Paper
The release of the Issues Paper and the Position Paper followed a review of the THI marketplace in Canada, including receiving submissions from the public, conducted between 2014 and 2016 by a CCIR working group comprised of representatives of the CCIR and the Canadian Insurance Services Regulatory Organizations, a national association of insurance intermediary regulators.
Overall, the CCIR concludes that Canada has a strong and reliable travel insurance market. However, from the comprehensive review that was undertaken to better understand the issues and concerns raised, it is the CCIR's conclusion that there are opportunities for improvements to be made within the travel insurance marketplace, especially in the fair treatment of consumers.
It is also observed that key stakeholders in the industry are taking a proactive approach to improve the consumer experience in order to ensure confidence in the product is improved. The industry has collectively come together to propose certain possible solutions and the CCIR acknowledges the engagement of the industry in this regard and will continue to work with those stakeholders.
The Issues Paper, Stakeholder Submissions and Position Paper each focused on the following core issues:
- Product design
- Marketing and disclosure obligations
- Distribution channels and third-party service providers
- Claims management and complaints process
- Education of customers and sales teams
- Industry data collection
In the Position Paper, the CCIR considered the Stakeholder Submissions and set out a number of recommendations in each of the above areas. While acknowledging the value of the consultation and commending a number of existing industry initiatives, the CCIR recommendations call for a somewhat more extensive reform of existing practices than was generally envisaged by the stakeholders. In particular, the CCIR appears to be less confident than industry participants that alleged consumer confusion can be best addressed via education, rather than improvements in the design of THI products themselves.
The following discussion summarizes the CCIR's views on each of the issues above, with reference to relevant stakeholder comments. As noted above, we also describe the new THIA Bill of Rights in connection with the CCIR process (in which THIA was one of the key stakeholder representatives).
The Issues Paper, Stakeholder Submissions and Position Paper all dwelled at some length on issues of product complexity, terminological consistency and the integrity of the underwriting process.
The THI offerings of Canadian insurers come in a wide variety of forms and options. While this might be advantageous to consumers in many respects, it also arguably contributes to the complexity of the THI marketplace (by making it difficult to comparison shop, for example). Decisions that consumers must typically make include whether to purchase coverage for single or multiple trips, medical or non-medical (e.g. trip cancellation), coverages, benefits for co-travellers and many others. The CCIR is also concerned that many providers offer so many options and "bundles" that the customer may have difficulty navigating the product guides that describe them. For example, a study by the Québec regulator, the Autorité des marchés financiers ("AMF"), found that about two-thirds of all such guides are more than 30 pages long, with about one in four exceeding 50 pages. The Position Paper specifically noted the CCIR's concerns about situations in which the coverage plans that would suit a potential insured are described in one part of a lengthy document, while relying on definitions in a different part of the document that potential purchasers might not notice.
While some stakeholders argued that their consumer education efforts would significantly assist in overcoming difficulties of this nature, the CCIR recommendation focused less on education and more on a simplification of documentation accompanied by a reduction in the number of offerings. Among the potential changes that the CCIR appears to endorse is the tailoring of documentation to the potential purchaser through the omission of material on plans and options that would not be available to him or her.
Terminology and Definitions
One constant theme of the CCIR review was the lack of standardization among THI products, with respect not only to the structure of coverage plans but also to the terms used and the definitions assigned to them. The Issues Paper accordingly asked whether any terms or expressions should be given industry-wide standard definitions in order to simplify the THI comparison-shopping and purchasing experience. The CCIR cited "insured risk", "emergency" and "treatment" as specific examples of terms whose usage is inconsistent in the THI marketplace (and occasionally even across the product offerings of a single insurer).
Stakeholders were generally open to terminological standardization, with several referring to their own ongoing efforts in their submissions. The Travel Medical Experts Working Group of the Canadian Association of Financial Institutions in Insurance ("CAFII") noted that it has been working since 2015 on a series of benchmark definitions, exclusions and limitations applicable to THI policies, in addition to using "plain language" where possible. In a complementary effort, a committee of the Canadian Life and Health Insurance Association ("CLHIA") has developed approximately 10 standard definitions and 16 standard exclusions and limitations, in addition to proposing an expansion of the CLHIA's Guideline G5 (Travel Insurance) to more fully reflect best practices in THI design and documentation. The committee's proposals are currently being tested with consumers. Implementation - which is likely to be a multi-year process - is expected to begin in the Fall of 2017.
Other stakeholder organizations, including the Chambre de l'assurance de dommages ("ChAD") and THIA, also supported this approach (THIA reported that it has developed uniform recommended definitions for terms such as "stable", "treatment" and "pre-existing").
The Position Paper recommends more efforts of the type in which CAFII and THIA have been engaged, adding that a target deadline should be established for adoption by the entire industry once all stakeholders have been consulted.
The Underwriting Process
Also of concern to the CCIR is the widespread perception that automatic acceptance - which occurs in about 95 percent of cases - is essentially being achieved by deferring the underwriting process until a claim has been made. The result, according to the CCIR, is that some insureds purchase policies that offer them less protection than they realize because the multitude of exclusions necessary to make automatic acceptance feasible entails the rejection of many or most of the claims that they would be likely to make.
In their submissions, industry stakeholders were generally of the view that a combination of consumer education and clearer contracts would alleviate this circumstance. However, while the CCIR applauded the educational initiatives, it clearly felt that more was needed, and recommended that insurers modify the application process so that applicants are directed to the product that best suits their need and so that those with medical issues go through the full underwriting process rather than being automatically accepted for policies that provide them with less coverage than they may be expecting. Availability of 1-800 support lines (already mandatory in Québec and often found in other provinces) for the purposes of assisting potential purchasers in understanding, evaluating and comparing products is also recommended.
Marketing and Timely Disclosure Obligations
As noted above, the CCIR considers THI disclosure documents to be, on average, overly long and complex. The Issues Paper accordingly asked respondents for their views on how such documents could be made more user-friendly, with an emphasis on presenting essential information clearly. While THIA, like other stakeholders, questioned the premise that the documents are frequently misunderstood, it reiterated its commitment to simplified language. It also voiced its support for a short "summary of coverage", with the caveat that it will always be important for potential purchasers to familiarize themselves with the full policy. The CLHIA is currently developing a glossary designed to improve the accuracy of medical questionnaire responses by bridging the gap between colloquial and medical language - for example, by clarifying that high blood pressure is a heart-related medical condition even though it is often not regarded as such by non-specialists. Additional ideas were suggested by other stakeholders: for example, the Third Party Administrators' Association of Canada ("TPAAC") suggested that, where a contract document is used that covers multiple coverage plans, the one that the customer has purchased should be clearly identified.
In the Position Paper, the CCIR states that insurers "must simplify and improve disclosure documents" using plain language and generally aim for shorter documentation that is specific to one plan, regime or option. This recommendation reflects comments in the submissions received, as noted above. In addition, the CCIR recommends that insurers make the full policy available to potential purchasers on a no-obligation basis in order to facilitate comparison shopping.
Distribution Channels and Third-Party Service Providers
THI products are often distributed as individual or group plans through travel agents, employee benefit plans and credit card arrangements, in addition to licensed insurance representatives and deposit-taking institutions. The CCIR and the industry agreed that insurers are accountable for ensuring that those distributing their products are appropriately licensed. As THIA noted in its submission, the Office of the Superintendent of Financial Institutions ("OSFI") requires that insurers oversee the activities of all outsourced service providers. CAFII suggested arranging for credit card providers to send a yearly reminder to their cardholders outlining their insurance coverage.
The CCIR recommendation is that, where appropriate, there should be effective controls in place to ensure that those who promote and sell the insurer's products fully understand them. In the case of group products, such as those sold through credit cards and employer plans, the CCIR recommends that insurers consider evaluating the level of understanding of group members.
With respect to third-party service providers more broadly, the CCIR agreed with respondents who noted the importance of ensuring that customers are aware of the insurer's identity and of how to reach the insurer. When they are dealing with the insurer through a third party, they must be treated as fairly and knowledgeably as they would be if they were dealing with the insurer directly. THIA's submission noted that existing regulations already require the identification of the insurer on all materials and moreover that Canadian THI insurers already impose controls and conduct audits with respect to the manner in which third parties promote and deal with their products. The Position Paper states clearly that CCIR does not believe that any new restrictions are necessary with respect to the outsourcing of functions to third-party administrators.
Claims Management and Complaints Process
The issue of claims management relates to situations, occasionally publicized in the media, in which a claim is denied on the ground of a material misrepresentation in an application that the consumer maintains was completed in good faith. As the Position Paper notes, this is closely connected with the concern that some applications are not reviewed in detail by the insurer until a claim has been received, with the result that an insured may, in the meantime, incorrectly conclude that the information provided in the application was in a form acceptable to the insurer and that he or she is appropriately covered.
In their submissions, the stakeholders placed considerable reliance on existing claims procedures, with improvement being achieved by promoting increased awareness of the ability to appeal a denied claim or to access an ombudsman. For example, CAFII emphasized the importance of a multilingual claims team and a clear decision-making framework while observing that its own polling indicated a 92 percent satisfaction rate with the claims processing experience. For its part, THIA noted that a documented complaints procedure is already required under the federal insurance regulatory regime. Finally, as part of the ongoing initiative described above, the CLHIA is currently developing a best practices protocol that is designed to clarify internal claims escalations processes for the benefit of policyholders.
The CCIR recognized the willingness of the stakeholders to continue to work to improve the transparency of claims handling and dispute resolution procedures. Following a recommendation of the CLHIA, the CCIR suggested the development of industry-wide best practices with respect to the claims review and escalation procedures. The Position Paper also stressed the CCIR's expectation that insurers will improve their up-front disclosure and, in particular, that they will clearly explain the potential consequences of misrepresenting facts on an application form, whether or not this happens in "good faith". On a related point, the CCIR applauded stakeholder proposals to routinely review cases in which claims have been rejected on the basis of medical questionnaire errors that are unrelated to the substance of the claim actually made.
Education of Customers and Sales Teams
Many of the recommendations discussed above have involved efforts to better inform purchasers about the nature of the coverage available to them and their post-purchase rights. The Issues Paper also raised the matter of "consumer education" in the broadest sense and the Position Paper makes a number of related recommendations in that connection. Some of these - such as the use of plain language and reduced complexity in policy documents - are noted above, but the Position Paper also urges the industry to consider public education initiatives that will help to de-mystify a market that THIA characterized in its submissions as "not as developed and mature" as the rest of the insurance industry. These educational efforts would include promoting awareness of the variety of coverage options and of the need for accuracy in applications and the limitations inherent in group coverage.
The Position Paper also discusses the education of sellers, which was generally left unaddressed in the Stakeholder Submissions. The CCIR noted that insurers are responsible for ensuring that sellers (whether licensed or exempt) have sufficient knowledge of their products to permit them to:
explain key terms, the nature of the guarantees, options, conditions, and exclusions of the product; and
provide reliable information/advice on the product or know when and where to direct the consumer for information/advice.
The final issue raised in the process was improved THI data collection. While the stakeholder groups all supported the concept in principle, there were relatively few specific suggestions with respect to the types of data that could be collected. One possibility would be better complaints tracking, as advocated by the TPAAC, while CAFII suggested general consumer research such as it had commissioned from Pollara Research to assist it in responding to the Issues Paper. In the Position Paper, the CCIR stated that it intends to monitor the adoption and implementation of proposals by industry to establish key indicators, which (as THIA noted) would take some time, and subsequently to monitor and report on them. An additional issue noted by THIA was that, as a smaller insurance sector, THI is typically using systems that were developed for other insurance categories and which may therefore need to be adapted to collect standardized THI-specific data.
THIA'S BILL OF RIGHTS AND RESPONSIBILITIES
In a related development, on June 1, 2017, THIA released its Travel Insurance Bill of Rights and Responsibilities, a significant milestone on the path toward the goals of clarity and consumer protection set out in the CCIR report. The statement of rights and responsibilities begins with three core principles:
Understand your travel insurance policy - Insurance providers have staff available to answer any questions related to policies
Know your health and consult a health care provider if you have any questions
Know your trip - How long will you be gone? Are you a snowbird? Will you be travelling many times during the year?
It then continues as follows:
Under THIA's Travel Insurance Bill of Rights and Responsibilities travellers have the right to:
A No Obligation Purchase: Travel insurance providers will allow a minimum 10-day free review of the policy.
Be Informed: You will receive your policy documentation and confirmation of coverage outlining the policy terms and conditions whether purchased in person, over the phone or online.
Request Clarification: You may ask questions about the travel insurance you have purchased.
Review & Modify Medical Screening: You will receive a copy of the answers you provided on the medical questionnaire prior to the start of your policy.
Receive Worldwide Assistance & Toll-free Support: You have 24/7 access to the help you need when you need it from your travel insurance provider.
Fair & Prompt Claims Handling: You will have a timely and transparent communication process.
Escalate & Appeal: You may challenge decisions and request additional reviews with new information.
Confidentiality: Your personal information will be protected in all dealings with your travel insurance provider.
Know Your Insurer: Your policy will clearly identify the underwriter of your travel insurance and the process to file and resolve complaints.
Your Preferred Language: You may transact and correspond about all components of your travel insurance in English or French.
Travellers are responsible for the following:
To Provide Accurate Information: The travel insurance application needs to be completed accurately.
To Understand Your Policy: Take the time to read and understand your policy.
To Travel With Proof of Insurance: Have your policy number and emergency assistance contact information easily accessible.
To Notify Your Travel Insurance Provider: Provide prompt and timely communication when a claim situation arises and provide all requested documentation related to your claim including all relevant receipts.