Travel insurance cost impact warning on no-deal Brexit

Out-Law News | 13 Sep 2019 | 2:49 pm | 2 min. read

The cost of travel insurance premiums could increase significantly if the UK leaves the EU without a formal withdrawal agreement in place, while those with pre-existing medical conditions could find it harder to obtain cover, according to insurance expert Sophia Hytiris of Pinsent Masons, the law firm behind Out-Law.

A Financial Conduct Authority (FCA) consultation (41-page / 680KB PDF) on proposals which would require travel insurance providers to direct customers struggling to obtain cover due to pre-existing medical conditions to a directory of firms who may be able to assist closes on 15 September.

Hytiris said that these customers would be particularly vulnerable in a no-deal Brexit scenario, as they would no longer have access to state-provided healthcare in EU member states through the European Health Insurance Card (EHIC) scheme.

Sophia Hytiris


In a climate where we face the unforeseen consequences of a 'no deal' Brexit, insurers must remain alert to the fact that medical expenses may increase.

"Insureds are frequently prejudiced by policy exclusions which exclude insurance cover for medical expenses that are incurred abroad and that may arise out of a consumer's pre-existing medical conditions," she said. "Indeed, the FCA has recognised that pre-existing medical conditions can create a barrier to access to travel insurance cover, which is why it has engaged the views of the insurance industry in respect of its new 'signposting' rule."

"In a climate where we face the unforeseen consequences of a 'no deal' Brexit, insurers must remain alert to the fact that medical expenses may increase impacting travel insurance cover irrespective of any policy exclusions or higher premiums that exist to address pre-existing medical conditions. For example, it remains a possibility that the EHIC will no longer provide any benefit to UK travellers if a 'no deal' Brexit ensues," she said.

"Medical expenses may increase significantly if consumers are unable to rely on EHIC cards. This has the potential to affect both insurers and insureds: policyholders are more likely to be declined cover or have their premium increased in the event that insurers are forced to indemnify them in respect of any and all medical emergencies that could arise abroad," she said.

The FCA has estimated that up to 14.1 million consumers with a pre-existing medical condition attempt to purchase travel insurance each year. Of these, 11% purchase a policy with an exclusion for their pre-existing condition, while around 0.7% are declined cover altogether. The FCA also believes that some of these consumers could benefit from shopping around, as they may be able to find more affordable cover from a different provider.

UK insurers paid out £209 million worth of medical expenses last year; the highest figure since 2010, according to the Association of British Insurers (ABI). The trade body has warned that travel insurance will become even more vital should the UK leave the EU without a deal and the EHIC cease to apply, although the EHIC does not cover all medical costs or the cost of emergency repatriation back to the UK.

The FCA is proposing to introduce a new 'signposting' rule requiring insurers to provide consumers with details of firms that are able to cover more serious pre-existing medical conditions. Firms would be required to do so where they are unable to provide cover to consumer with a pre-existing medical condition or where cover is cancelled mid-term as a result of the condition; where cover is only available with a mandatory exclusion for the pre-existing condition; or where coverage for the pre-existing condition comes at an additional cost.

The proposals form part of the FCA's wider programme of work on improving access to financial services for vulnerable consumers. The FCA is also intending to work with the industry to improve consumer understanding of the travel insurance market, including by producing new information on the impact of pre-existing medical conditions on insurance premiums.