Many Thanksgiving travelers will hit the road on Tuesday and Thursday, and that also means traffic has the potential to be particularly congested.
Along with the headaches come the related headaches of travel insurance providers. Thanks to the need to look tough, Americans are choosing travel insurance companies that are clearly going to want to sell them coverage — not to mention leave them feeling stung when things go wrong.
The same level of harshness in dealing with policies also goes beyond just charging excessive premiums. This isn’t to say that firms don’t do well. Quite the opposite: Travel insurance firms that score highly on customer satisfaction are booming. For example, USAA continues to be the most recommended travel insurance provider in the US, while Global Medical Assistance’s customer satisfaction rating has improved 15 percent in the last 12 months.
While travel insurance providers are minting money in the insurance business, year after year, the pricing of insurance has been variable, also according to your insurance provider. This is partly due to how insurance is constructed: while it’s easy for companies to make a dollar by charging as much as possible for a policy, there’s also less incentive to do so, as your next healthy trip can turn into an unplanned trip. But now there’s a good deal of evidence that points to the volatility of pricing. While most insurers offer a range of prices — often this also includes damage — not all offers consistency. One study on premiums found that some insurers would increase premiums by up to 5 percent after accounting for price and age, while other companies would lower costs. Those who are savvy and statistically inclined also opt for insurance with higher deductibles, rather than annual limits.
While some premiums are still higher than you’d expect on average, particularly for for annual policies, it’s clear that policies will vary from company to company. That doesn’t bode well for travelers who are eager to make smart decisions when it comes to choosing an insurance provider.
Back in 2011, travel insurance firm TripTrader had one of its analysts call two hotels where it was working on pricing. At one, the attendant revealed that the price of a policy in order to secure a room was $60 a night. The firm wanted to find out if an annual policy should cost $130 a night. The attendant later told the company that that might not be worth it, because the person in charge at the hotel hadn’t let the insurer inside. How true is that? Accommodations at a hotel that isn’t usually a decision-maker about prices can make assumptions about the travelers who are visiting. That’s why, for example, an insurer might give you an annual policy that might cost a bit more than you’d want. (This is likely a company that is going to expect more after you have a heart attack, but is more likely to charge an annual premium than give a very low flat rate.)
But the shock of $60 wasn’t the only thing that startled TripTrader’s analyst. The receptionist at the second hotel had told him that a policy would cost $100. She even explained that its location would be important to the company’s new policy pricing model. As TripTrader’s analyst put it, “because we’re in New York, you’re probably probably in the expensive end of your market and you have to match that.”
For TripTrader, this was an odd decision from a company that seemed hesitant to pay lip service to price control. This didn’t stop TripTrader from increasing its annual premium, however. As the story continued, a third hotel was actually willing to cooperate. Since its location was unlikely to have an effect on the price, and since TripTrader had been the least choosy of the three, it would be cheaper per night. But the rates suddenly became even lower than the second one. What all this showed was that based on travel trends, the company’s underlying costs must have been higher to stay competitive, particularly when it came to selecting destination.
Whatever you do, travelers should resist the urge to buy travel insurance based on the perceived lower prices. They may be cheaper, but even as a frequent traveler, and a Twitter-serves-as-a-welcome-tool for travel news, it can be easy to assume that it’s really just that: a lower sticker price, or prices might be lower than you’d expect. Knowing where you’re headed and what you have to bring will give you a good basis for the shopping you’ll need to do next.