Just How Many Travel Insurance Claims Are Denied?

Snowbird Robert Woodcock heard that only 2 per cent of travel insurance claims are denied. He quickly decided that’s 2 per cent too many.

“That doesn’t sound like a lot, but to [all of those in the] 2 per cent…it becomes a very serious problem,” notes the 72-year-old retired renovator and part-time hockey goalie from Toronto.

So we set out to learn more about the numbers, who is having their claims denied, and what could be done to reduce the rate of denials.

“It’s the worst decision we have to make is to deny a claim,” said Martha Turnbull, speaking for RBC Insurance executive to a CTV News reporter recently. “We deny less than 2 per cent of our claims on the travel business.”

She did not make clear what she means by RBC’s travel business, and neither would RBC’s public affairs department. We were told the company would not respond to our questions.

We were left to wonder whether that figure includes inexpensive claims, like trip cancellation, or whether most of those claims are big-dollar medical claims.

RSA was more specific. It boasts it paid more than 99 per cent of medical claims in 2011, 2012, and the first half of 2013 (meaning it denied fewer than 1 in 100).

Will McAleer, one-time director of business development at TuGo, formerly Travel Underwriters, in Richmond, BC, revealed a denial rate of about 5 per cent and Manulife Financial would say only that its denial rate is “in the single digits”.

We pointed out that single digits could mean anything from 1 per cent to 9 per cent, but the largest player in the industry declined to be more specific.

(Industry leaders like Manulife and RBC Insurance don’t stay hush-hush to avoid looking bad to consumers. They must not appear to be signaling competitors, which could be seen to a cautious in-house lawyer to contravene federal competition laws.)

The farther afield we tried to gather information, the more times we heard the same reply: Contact the Travel Health Insurance Association of Canada (THIA).


Travel insurers plan to study themselves

John Thain, the new president of THIA, says the association plans a confidential survey in order to report a weighted average frequency of denials for the industry.

“Our objective is to see denials decrease,” he said.

Unfortunately, the final results of THIA’s survey are not available, at least for public discussion. But industry sources say that preliminary results indicate an average denial rate of 4 per cent for individual travel insurance claims, and 6 per cent for employer-sponsored group coverage. The average medical claim is said to be only about $4,000.

Such global figures are not particularly revealing, since the $1.2 billion industry that sells about 500,000 policies a year covers everything from missed flights to damaged rental cars.

As for medical coverage, the industry covers everyone from healthy little children on the way to Disneyland to their great-grandparents.

Will McAleer noted the rate of claims denial may differ among companies because some exclude those policies that are deemed void from the beginning because of an error or misrepresentation on the application.

We asked additional questions to learn if particular groups are vulnerable to having a claim denied. The answers we received were general in nature.

Surprisingly, though, retirees like Woodcock with a range of health issues are not particularly vulnerable to denials, according to some insurers. Any differences are only slight, said Manulife.


The most common reasons for claim denials

“The most common reason for a denied claim was ineligibility, accounting for approximately 55 per cent of denials,” said a spokesperson on behalf of RSA.

Both RSA and Manulife have three main reasons for denial:

  1. The customer not being eligible for the coverage (at the price paid) due to inaccurate or incomplete information on the application or medical questionnaire.
  2. The customer had an unstable pre-existing medical condition.
  3. The customer claimed for expenses excluded in the policy. 

Will McAleer said TuGo does notice, however, that errors on medical questionnaires are “particularly noticeable with travellers who are more senior in years and may have complex medical conditions and multiple forms of treatment.”


How one insurer tries to shelter seniors

“Our approach [at TuGo] has been to try and insulate consumers from mistakes made when completing the medical health questionnaire – whether the mistake is made due to the way they purchased [online, in a travel agency, or in an insurance brokers office] or not.

“In situations where a consumer does not answer the medical questionnaire correctly, TuGo will not void coverage, but rather consider the claim by instituting a deductible on the claim.

“This is helpful, since a financially crippling large claim would be considered and the insured protected as opposed to being left to deal with the hospital bills on their own,” said McAleer.

Ellen Roseman, a Toronto Star columnist and consumer advocate, says “pre-existing [medical] conditions can be tricky. People don’t know they can pay more for a policy that covers them. Also, they don’t know the rules for reporting a change in prescriptions or a diagnostic test.”

“I had one complaint that a senior was taken off his drugs because his medical condition improved. He didn’t report this and his claim was denied,” said Roseman. “His family said: This was good news about his health, so why was he penalized?”

Robert Woodcock says he has learned a great deal more about travel insurance after shopping this year, and he is determined never to make a mistake when completing a form.

Next up: The series conclusion. We talk to Woodcock about his search for coverage, find out if his opinion about travel insurance has changed, and learn about his new mission.


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