Sometimes you have to feel sorry for the insurance trade body the ABI as they seek publicly to defend the indefensible.
The insurance trade has been under attack, mostly from inside, that it is ageist on travel policies.
So the ABI looked for a tame newspaper that would publish “the truth” without asking any nasty awkward questions like us journalists are supposed to do. If we don’t ask questions we are just an extension of the PR industry.
So what lame response did the bleating boss of ABI come up with for insurers charging older people huge premiums or refusing to cover them?
“If insurance is to protect people effectively, it must be priced on the basis of the risk involved. A 60-year-old who buys life insurance at the same time as a 30-year-old will pay higher premiums, because their life expectancy is shorter. It is this principle that underlies why the over-70s pay more for travel insurance. They make more travel insurance claims, of higher value, than other age groups. The most expensive claims for travel insurance are for emergency medical treatment abroad and, as older people are more likely to need such treatment, their premiums are often higher to reflect this.”
No one doubts that some older people will have claims and that they could be more expensive than for others.
But, on the other hand, older people are less likely to take part in extreme sports, get massively drunk, dive off balconies into swimming pools or cavort in the sea at night.
The problem is that the insurance world collectively and individually cannot back up the huge extra premiums it charges. Of course it can point to individual examples, to make it look like a case.
To give a fair reason for higher prices it needs collectively and by individual company to be able to provide premium and claims stats for every single age group. For every single year.
Of course it will never do that as hard facts could prove that insurers are making a lot of money out of older travellers.
I can see the ABI defence now; on the lines of “the total cost of claims for those over 80 is twice that of those over fifty” – but that is politician statistics. To get a real comparison you must compare premiums too. For example, insurer X could say that total claims for those over 75 are twice that of those aged 45. But it will claim trade secrecy for refusing to reveal that the total premiums from the over 75s is three times what they get for those aged 45, so in fact the loss ratio is less.
The real complaint is that some people are old and frail at 50; others at 70 are almost as fit as they were at 30. The big problem is that age is a poor guide of whether someone is likely to claim. On that basis they may as well charge separate rates for men and women, straights and gays, black and white, but that of course would not be politically correct.
“Travel insurance for older people is available from specialist providers; the challenge is to raise awareness of this among prospective customers, something that my association is committed to do.”
This is the tired ABI defence for almost everything where insurers as a group are charged with being unfair to customers. It is always that there are specialists if only the consumer would be bothered to look. It would be like the supermarkets saying “it does not matter that we charge an arm and a leg for fresh food; you can get it cheaper from your local market”. It misses the point that it is about availability everywhere and about insurers taking liberties with getting as much money as they can from sections of the community who are les inclined to argue with them than others.
“We are working hard with our member companies, in consultation with organisations such as Age Concern and Help the Aged, to find a way for any insurer unable to offer cover to point the customer to companies who can.”
This is the same load of horse manure that the government uses when told that poor people are suffering from high electricity prices, offer to help them find the cheapest supplier.
The simple fact is that insurers are making money out of the older travellers. And what they want to do is make sure they do not pick up the very risky end of the market. In home and motor insurance it is an anti-competitive practice called ‘redlining’ where collectively insurers try not to quote or where quoted prices are too high. It has gone on for decades. Travel is no different, except the redlining is by age rather than postcode.
Age and lifecycle stages are key demographic variables influencing tourism demand. People in Europe are living longer and retiring sooner. It is estimated that by 2030, nearly 50% of the world’s population will be over 50, mostly enjoying good health. People are increasingly travelling as part of their need to keep fit and healthy, which is why health and wellness holidays are booming.
I am afraid that the ABI is in the dark ages where granddad had his pipe and slippers, and granny had her knitting. Now granddad is surfing while granny has her latest spa treatment and massage.
Travel insurance: Hot Topic: June 2008
