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Travel insurance: Multiple coverage rules

Changes are occurring in some travel insurance contracts regarding which policy should pay first when there is multiple coverage.

Travelers are often insured under more than one plan. Coverage may be included within an plan member’s group insurance plan, a spouse’s group insurance plan, credit card insurance coverage, an individual policy, or may be purchased separately through a travel agent.

Traditionally, the insurer who is contacted first in the event of an emergency situation processes the claim. The insurer manages the provincial plan recoveries, reimburses the claimant or service provider for their eligible expenses up to their plan maximum, and then shares the costs with the other insurers as appropriate.

It has been generally accepted that when a plan member is covered by more than one travel insurance policy, the plan member’s group insurance plan will reimburse the claim first. They are referred to as the “primary” or “first” payer. If the policy limit is reached, a spouse’s group plan will pay next, and if applicable, followed by the other insurers.

Recently, some group insurers have added a provision in their travel insurance policies stating that they will only pay for expenses that are not covered by the plan member’s other travel insurance policies; this is referred to as an “excess coverage clause”. In other words, they become the last payer when the plan member has group or individual travel coverage under more than one plan. Plans without a similar provision are at a disadvantage, requiring them to cover the bulk of the expenses claimed. It can be expected that more travel insurance providers will implement an excess coverage clause, which could add some confusion to the claim payment process.

Impact on claimants: The claimant experience will not be impacted and the claimant will not see a change in the coverage provided. The administration and payment of eligible travel claims will be coordinated behind the scenes and will remain seamless to the claimant, although insurers would likely require information on other coverage the claimant is entitled to.

For Plan Sponsors: Implementing an excess coverage clause can be expected to eventually reduce the cost of travel insurance included in group benefit plans.

Employees working abroad

Even if a group benefit plan includes travel insurance, it may be recommended that employees sent abroad for business purposes be appropriately covered. Some plan members may be exempted from coverage because they are covered under their spouse’s benefits plan, but it may not include travel insurance. When an employee travels for business purposes, the employer would generally be deemed responsible for the costs related to an unforeseen sickness or accident.

It is prudent to proactively inform plan members that they should first utilize their benefit program travel insurance in the event of a claim, unless they have made alternative arrangements. If the benefit program has implemented an excess coverage clause, then claims will be spread between different providers so that each available source shares part of the cost.

News & Views - September 2017 (PDF)