TRAVEL RISK WHAT YOU NEED TO KNOW BEFORE YOU FLY

Transcription

1 30 August 2011 TRAVEL RISK WHAT YOU NEED TO KNOW BEFORE YOU FLY Executive Summary Discussion of the four main travel risks: robbery/baggage loss, trip delay/cancellation, medical expenses and unforeseen circumstances Suggestions on how to go about selecting the most suitable travel insurance Contributors: Chong Zhikang Tan Woon Loong Introduction Singaporeans love to travel and in order to travel with a peace of mind, it is important for one to buy a travel insurance that is comprehensive enough. In Singapore, there are many companies that offer insurance, such as NTUC Income, Chartis, MSIG and OCBC. Many people however always choose the cheapest plan when it comes to comparing the insurance package and fail to look at the terms and conditions, which may be very different. Some may only realize that they are actually not covered in the plan when they unsuccessfully make the claims. Hence it is always good to assess the travel risk that you may experience and seek for a plan that allows you to transfer or share your risk. In this article, we will be discussing some common risks that one may experience during his vacation or travel, namely, robbery/baggage loss, trip delay/cancellation, medical expenses and finally unforeseen circumstances. Baggage Loss/Robbery One of the most common risks that travellers face is baggage loss. This is especially true when passengers are taking a transit flight. This risk can however be transferred partially through buying insurance but again it is very difficult to quantify every item in the baggage. A very good example would include personal clothing and food. Even for expensive items like cameras and laptops, the claim from the insurance can be difficult. Depreciation may be included if you do not have the receipt to prove that the item is less than one year. Hence it is always advisable for travellers to carry their valuables on board to minimize such risk. In addition to that, many travellers also encounter baggage loss on the train and this is especially common for train ride at night. Once again, safety precautions should be taken even if the insurance Page 1 of 6

2 covers the risk. If you are travelling in groups, you should always fasten your bags together and carry your valuables by your side. This will also bring us to the topic on robbery and theft. We all know that not every place is as safe as Singapore. Even well known places like Russia and Spain are plagued with robbery and theft. Hence it is always good to travel in groups and avoid getting too drunk or go out at night. Avoid bringing too much cash at hand as well. This is because most of the insured amount is capped very low so it is always safer to bring a credit card along. Any loss of credit card can be handled more easily since there is a 24hr hotline to cancel your card immediately. Your liability would also be capped at $50 which actually mitigates your loss as compared to losing your cash. Trip Delay/Cancellation Protection against trip delay and cancellation is one of the main reasons for a purchase of travel insurance. As air travel evolves from a luxury to a necessity, airports are slowly becoming overcrowded, and it is no surprise to see flights being delayed and cancelled every single day. There is also the possibility of your airline or tour operator declaring bankruptcy, and you would want to be able to get your money back. Finally, you may have to cancel your trip due to personal reasons, such as you or your family member or travel companion getting sick or injured, or even passing away. With all these uncertainties affecting your trip, it is best to have adequate protection against trip delay and cancellation. With the onset of the global financial crisis, budget airlines have become the rage for cheap and affordable travel. However, given their propensity for cost- cutting measures that increase the probability of occurrence of delays and cancellations, buying travel insurance is even more value for money, since travel insurance providers currently don t look at which airline you take. It is prudent to get travel insurance as soon as you confirm your air tickets, as the coverage for trip cancellation begins the moment you purchase the travel insurance, so you maximize your coverage while paying the same price. For the statistically- inclined, a powerful website to use is The website contains detailed information about many different things, from the average delay for your flight to the total number of flight delays and cancellations globally. Different airlines and routes have different risks of delay, so it is always a good idea to take a look at the statistics to prepare yourself for the possibility of having to wait at the airport. Medical Expenses Everyone falls sick or gets injured at some time or other in their life. But what if this happens overseas? As strangers in a new environment, there is a higher probability of catching an illness, and a simple thing like eating from a roadside stall can result in hospitalization. While travelling, people generally do not bring a large amount of money for emergencies. Thus, most people are caught Page 2 of 6

3 unprepared when they fall sick or get injured overseas and have to pay for medical expenses. Depending on the severity, this can cost more than the cash available on hand. Couple this with the fact that the country you visit may have poor transportation, medical facilities, and might not even speak English, then you are in deep trouble. If you really end up in the extremely rare scenario of needing urgent medical attention in a foreign developing country, then you most likely require overseas emergency medical evacuation services, or medevac. These services transport you to the nearest appropriate medical facility, and then repatriate you to your home country. These services can cost tens of thousands, depending on the transportation method used. Travel insurance can cover us for these unexpected medical expenses. Most travel insurance offer hospital benefits and pay for medical expenses up to a certain limit. Thus, not only is it easy on the wallet, it also offers peace of mind as you know that the details will be sorted out for you. One important point to take note is that travel insurance does not cover pre- existing medical conditions, so if you have asthma attack overseas, your insurance company will not help to pay for the expenses incurred. And if you are participating in high- risk activities such as mountain climbing or diving, ensure that the travel insurance you purchase covers it. Unforeseen Circumstances Unforeseen circumstances can include many situations but in this article, we would like to bring your attention to 1 case which has happened not too long ago and also one with regards to terrorism. This will ensure that you understand that buying insurance policy is easy but claiming can be a difficult task because of the terms and conditions attached. If you are on an overseas trip, there is always a risk of any unforeseen circumstances occurring. Such an example would be the riots in Thailand that led to the closure of the airport. This however may not covered by an insurance company. Even the compensation given by the airport is not enough to cover the expenses incurred during the closure period. One potential risk treatment can be risk avoidance. In order words, avoid travelling to countries with political instability unless necessary. Although global security has been tightened since 9/11 and many terrorist attack, it still presents certain degree of risk to travellers. This is especially so if you travel to countries with high level of known terrorist activities. Terrorism risk can simply be seen as three parts: threat, vulnerability and consequences. Knowing these three components may increase one s awareness during the travel. Even though insurance may cover for losses in the event of any act of terrorism, it is always important to have situational awareness. It is always important to stay vigilant at all times, especially in public places. In the event of biological or chemical attack, it may not necessarily be covered in the insurance, hence it would be important to know how to protect yourself during an emergency, for example knowing the escape route or taking what actions to after the attack. Alternatively, seek for an insurance that has the maximum coverage if you have to travel to the countries with high risk of terrorist attack. You can save on anything but definitely not insurance. Page 3 of 6

4 Conclusion The risks of travel are numerous, and can occur when you least expect it. To protect yourself against these risks, travel insurance is a very attractive option. We highly recommend you purchase it if you are going to far- away or undeveloped countries, although it is always good to play safe no matter where you are travelling to. Though you can buy travel insurance online, it is better to use an agent, as the price is the same, but having an agent gives you a point of contact that helps you process your claims. We will end off with this table, which is an example of a comparison between 5 choices of travel insurance offered in Singapore. Use it only as a guide, as the values given may vary over time. It is important to compare and find out what each travel insurance covers so that you can find the best fit for you. If you travel a lot, an annual plan may be more worth it instead. And that is all for the article. Have a safe trip! Figure 1: Travel Insurance Comparison Chart. Source: content/uploads/2010/11/travel- Insurance- Comparison.pdf Page 4 of 6

5 References: How can vacationers reduce the risk of losing their luggage when they travel on commercial airline flights?, can- vacationers- reduce- the- risk- of- losing- their- luggage- when- they- travel- on- commercial- airline- flights Travel Guard Chartis, Travel Assist, rding%20- %20SPECIMEN_tcm pdf How to travel by train in Europe safely, train- europe- safely.html When your credit card is lost or stolen, Mail Online News, 28 June 2011, /Terminal- capacity- Overcrowded- skies- cost- millions- delays- airlines- look- space- expand.html Reuters, 30 June 2011, asia- airlines- iduklne75t The New York Times, 17 July 2007, Emergency Medical Evacuation 101, medical- evacuation %E2%80%94- what- overseas- travelers- need- to- know/ insurance/3/ Foreign & Commonwealth Office, Terrorism, and- living- abroad/staying- safe/terrorism Estimating Terrorism Risk, Page 5 of 6

6 Disclaimer The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with NTU RMS Research Department. Page 6 of 6