In a report published on 9 October 2019 – called "Thematic Review on Costumer Protection Issues in Travel Insurance" – EIOPA expressed its concerns regarding several consumer protection issues detected in the European travel insurance market.

In particulars, such concerns regards the rising commission applied by insurance intermediaries, the exploitation of behavioral biases when selling online travel insurance policies and the potential erosion of product value and features. Also insufficient cover, denied claims, unclear and conflicting terms and conditions have come to light as general trends in disfavor of consumers.

EIOPA detected that such risks have been increasing also due to new market players selling travel insurance products online as an ancillary activity (such as airline and ferry companies, price comparison websites, websites, aggregators, banks, supermarkets...).

In addition, EIOPA found a significant risk that high number of consumers could be harmed by the potential high degree of dismissed claims due to no pre-contractual medical screening. In this regard, the report estimates that around 70% of insurers do not include pre-existing medical conditions in the coverage of travel insurance products.

A Warning to Insurers and Insurance Intermediaries to Tackle High Commissions for Their Products

As a result, EIOPA issued a warning to the travel insurance industry as a supervisory response on the issues found. In particular, EIOPA expects all market participants to fully comply with the IDD; accordingly they are asked to:

  • review their business model which were found not consistent with the fundamental principles set out by the IDD, due to the "disproportionately high commissions" taken by insurance intermediaries across all distribution channels and the "very low claims ratio";
  • assess their distribution agreements to ensure that they are capable to act fairly and professionally in compliance with the best interest of their customers;
  • ensure that, even where travel insurance is sold through an ancillary insurance intermediary exempted from the scope of the IDD, basic conduct of business requirements under the IDD are complied with (including always acting in the best interest of their customers, avoiding conflicts of interest related to remuneration and on offering products that take into account the demands and needs of the customer).

In this regard, EIOPA and NCAs will increase their risk-based supervision of insurance undertakings and insurance intermediaries, in particular in the national markets where risks are identified, including monitoring the market for ancillary insurance products.

In particular, NCAs will, if necessary, exercise their supervisory powers, including investigatory powers and powers to impose sanctions for failures to comply with the conduct of business requirements set out in the IDD including the duty to act in the best interest of customers and to not pay or receive remuneration that conflicts with this duty.

EIOPA has based its report and warning on research it conducted by issuing a questionnaire to 201 insurance undertakings operating in 29 European Countries. The NCAs distributed the questionnaire to undertakings representing approximately 60% of the total gross written premiums of the travel insurance line of business in the national market. EIOPA also collected input from industry and consumer associations.

The EIOPA report and warning can be downloaded at the following link on the EIOPA website.

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