Sunday, 1 May 2011

The Amazing Race 18, Episode 9 (travel insurance)

Zermatt (Switzerland)

Who can you call on for help when things go wrong in a foreign country? And what can they do?

This week the remaining teams on The Amazing Race 18 got to act out some of the roles of Alpine emergency first responders. Carried by rescue helicopter to a snowfield and glacier below the Matterhorn outside Zermatt, each couple had to choose between locating and digging out a mannequin buried by a simulated avalanche, or having one partner lower the other into a crevasse in the ice and haul them back out with the “victim” of a simulated fall.

In real life, neither a rescue team nor a television production crew is likely to be standing by if you get into trouble like this, nor are you likely to have time to wait for them to arrive. The most obvious real-world lesson is that you shouldn’t be hiking on a glacier or into avalanche-prone backcountry without self-rescue gear (such as the personal radio beacons used to locate avalanche victims) and the knowledge of how to use it.

There’s a more general lesson here as well, applicable even to people who aren’t engaging in extreme winter mountain sports: In life or death situations, travellers are almost always dependent on their own resources and on local emergency services. Being wealthy and/or having insurance may help you get access to better quality long-term follow-up medical treatment. But neither wealth nor insurance can or will do anything to reduce the health or safety risks of any of the things you do, or might do, while travelling, or provide you with better emergency rescue or medical services.

That should be obvious, of course, but it’s a lesson that isn’t often reflected in travellers’ decisions. It’s natural for travellers to worry about what strange things might go wrong when they travel to a strange land. But many travellers try to cope with that fear — a fear rooted more in fear of the unknown than in rational risk assessment, as I’ve discussed in The Practical Nomad: How to Travel Around the World and in other articles — by buying so-called travel insurance as a security blanket.

I get more questions from travellers about travel insurance than about any specific issue other than airline tickets, and my FAQ about travel insurance is one of the most visited pages on my Web site. My sense is that many people have difficulty choosing insurance products not just because travel insurance marketers prey on people’s fears but because many would-be purchasers of travel insurance want to buy “safety”, which is something that insurance can’t provide.

Insurance salespeople talk about all the bad things that could happen, but talk much less about what, if any, difference — often, none at all, at least in the short-term — it will make to have insurance if things do go wrong.

For example, the dollar value of your luggage is likely to be the least of your problems if all of your possessions are stolen while you are travelling. No insurance will make you less likely to have your pocket picked, to lose your wallet — or to fall into a crevasse. No insurance will have any effect on the bureaucratic hoops you have to go through to get your passport and other travel documents replaced. No travel insurance will have any effect on the likelihood that you will get sick, whether from traveller’s diarrhea or from a flareup of a pre-existing medical condition. With rare exceptions, no insurance will make any difference in how long it takes you to get to a doctor if you are sick or injured, or how skilled the local doctor will be.

Unlike health care providers in the USA, few foreign doctors or hospitals will be willing to bill a travel insurance company directly. You’ll have to pay for medical services, get detailed documentation, and submit it for eventual reimbursement if your claim is allowed.

The only risk on which travel insurance will have any effect is the financial risk that you will come home poorer as a result of the out-of-pocket costs of dealing with things that went wrong. Buying travel insurance won’t make you safer and won’t make travel safer.

Buying insurance may or may not be a rational financial decision, depending on your financial ability to self-insure for particular risks, but it’s not a rational response to fear of the unknown or fear of any but the financial consequences of things that might go wrong. Either take risks or don’t take risks, but don’t think that insurance can or will make travel risk-free.

Only after you separate insurance decisions from your personal mechanisms for coping with fear can you begin to think about which bad things:

  1. are more likely to happen while you are travelling than at home,
  2. would have financial consequences for which you can’t afford to self-insure, and
  3. aren’t covered by any of your existing insurance policies.

These, and only these, are the particular types of coverage you should consider purchasing.

Unfortunately, “travel insurance” is usually sold as a bundle of coverages some of which are essentially worthless, others of which are unlikely to have costs so high that most travelers are better off self-insuring for them, and others of which often duplicate existing health or homeowner’s insurance (for those who have such coverage at home) or are likely be cheaper as a “rider” to your existing insurance coverage rather than as a separate travel insurance policy.

Some travel insurance policies are bundled with “emergency assistance” services. These services provide a telephone number that you can call in an emergency to talk to someone (in English) who will, to the extent possible, assist you with things like finding a doctor or a lawyer or getting your passport and documents replaced. That sounds good, except for the fact that it’s usually easier to find a doctor by asking local people, and that nothing that can be done by by phone from the USA by a third-party is likely to expedite any of these tasks. And keep in mind that when they say that an emergency assistance service will help you find a doctor, lawyer, etc., that doesn’t mean that the service or the travel insurance company will pay for that doctor or lawyer, or even reimburse those costs after the fact.

Link | Posted by Edward on Sunday, 1 May 2011, 23:59 (11:59 PM)

I agree that bundled "travel insurance" is usually unnecessary and often a rip-off, and I don't buy it - although if I were booking an expensive cruise or safari I might make a different decision for that specific trip. However, if my medical insurance didn't cover me abroad I would want medical insurance, and I always make sure I have medical evacuation insurance - which I have actually used.

Posted by: Kathy, 13 May 2011, 21:13 ( 9:13 PM)

Edward, I notice your insurance discussion doesn't mention K&R. Thoughts, comments, etc?

Posted by: AC, 13 May 2011, 21:55 ( 9:55 PM)

Its important to read the fine print and hidden clauses of these insurance companies. Most of these companies are out only to cheat.

Posted by: Oliver, 25 May 2011, 00:02 (12:02 AM)

Great post Edward!

Posted by: World Nomad, 25 June 2011, 13:54 ( 1:54 PM)
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