Curb on Mis-selling of Travel Insurance

IRDAI in the recent announcement poses a curb on the mis-selling of the travel insurance. Before this announcement, on most of the travel booking online portals and apps, the travel insurance option used to be pre-selected. The customers used to pay for the ticket without knowing the fact that along with the ticket amount they were paying for the insurance also.

To curb this mis-selling, the IRDAI has directed the insurers not to pre-select travel insurance option on any of the travel booking online portal. Also, the IRDAI has instructed the insurers that the insurance cannot be bought for domestic travel along with the ticket bought 90 days or more before the travel date. However, for international travel, it can be purchased anytime. The curbs shall come into force with immediate effect. All the group insurance which does not comply with these norms are said to stay terminated with effect from October 1, 2019.

Speaking on the announcement Gurdeep Singh Batra, Head - Retail Underwriting, Bajaj Allianz General Insurance said that the announcement by IRDAI coming in the wake of travel insurance gaining momentum is a welcome step. These norms are going to bring greater transparency between the insurer and the insured. The customer will be aware of what he is spending the money on and will read the terms and conditions to have a better understanding.

Currently, the travel insurance gets bundled with the travel ticket, and the purchaser used to pay for it irrespective of whether he/she wanted it or not. If you check your detailed bill while buying a ticket on Yatra or MakeMyTrip the additional cost of travel insurance is added to your bill. The insurance policy button is generally pre-selected unless you opt-out, and thus you end up purchasing the insurance and paying for it without even knowing.

Therefore, to bring greater transparency in the process of buying travel insurance, the IRDAI has rolled out this circular. Whether the policy is offered under group insurance or through any other travel portal or agency, the key points to be followed by the insurer are as follows:

1) Insurers are responsible for abiding by the IRDAI’s Regulation 6 and ensuring informed choice to the customers

2) The name of the insurance company offering travel insurance should specifically disclose the premium amount and the rate of tax applicable towards the travel insurance

3) The insurer shall ensure that the travel insurance option is not pre-selected on any portal or app providing the travel insurance

4) Where selected to buy, an option shall be offered for de-selecting or opting out of the purchase before completing the transaction

5) Provision shall be provided to the customers to go through the terms and conditions and benefits under the travel insurance and provide the consent on the understanding of the same

In order to ensure that every travel insurance abide by these norms, a clause is added in the agreement with the master policyholder and in terms and conditions of the group policy along with the provision to cancel the agreement in case the norms are not followed.

These norms are issued under Section 34 (1) provision of the Insurance Act, 1938. Insurers are also directed to put in place procedure to verify the compliance of the norms at least once in three months.

An industry official speaking on the travel policy purchase behaviour said that currently there is 100% insurance coverage under B2B travels as the employers want their employees to be covered. However, about 97% of the purchase is for international trips, majorly for hospitalisation claims. The claims for domestic travel have just started to penetrate the market. Nevertheless, the travel insurance on the loss of baggage has dipped due to efficient technological advancement by aviation players. Be that as it may be, how these new standards set by the IRDAI going to affect the travel insurance industry is yet to see.