Australians travelling overseas for the first time since international borders reopened are paying hundreds of dollars for travel insurance — but the fine print reveals some very big COVID-related exclusions.
Sydney couple Beth and Larry Lee are about to fly to the United States to meet a grandchild they've never seen in person.
"I'm the kind of person [who] watches people at airports and cries when the people they know come in," Ms Lee says.
"So, I'm really excited, but also a little nervous."
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The Lees' nerves about their trip to the United States comes down to the unpredictability of post-COVID travel.
A recent survey by consumer group Choice found only 23 per cent of Australians were confident making travel plans.
"There are nerves because, if something happens, we might get stuck over there. We might end up in hospital," Mr Lee says.
"And we won't have money to cover that."
To try to protect themselves financially, Beth shopped around for travel insurance that could cover them for COVID-related issues.
She called several companies and got knocked back, before finding one with a supplementary policy for COVID-19.
What does their COVID travel insurance cover?
The Lees' travel insurance with the company Southern Cross cost $698 for two people for three weeks to the United States.
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It was slightly more expensive than standard cover because the retired couple have some pre-existing medical conditions.
The Lees were only able to take out their policy to travel to the United States after the Smartraveller travel advice was downgraded from "do not travel" to instead "travel with caution", due to its ongoing COVID-19 outbreaks.
When it comes to what their policy covers for COVID-19, the Lees are protected for:
- Medical expenses if they are diagnosed with COVID-19 while on their journey
- Costs to change their travel arrangements if they, or a relevant person, are diagnosed with COVID-19 before they leave and their journey is cancelled or amended
- Costs to change their travel arrangements if they, or a relevant person, are diagnosed with COVID-19 after they leave and their journey is interrupted or cut short.
Importantly, if the travel advice to the United States changes to "do not travel", ABC News has confirmed that Southern Cross will not cover them for COVID-19 expenses if they decide to push forward with their plans.
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"They would be able to claim under our COVID-19 cover for costs to [cut short] their journey and return to Australia, as the change happened after they left and was unexpected," Southern Cross said in a statement.
"It's really important people monitor when they're travelling around.
"You could be in New York and, while you're there, there's a huge surge in COVID-19 cases in Los Angeles. Smartraveller updates change to say "do not travel" to Los Angeles because of the surge.
"If you go to that high-risk city, regardless of government advice, and catch COVID, there won't be cover. If you go anyway, against government advice, and have an unexpected medical event, then there would be cover."
It's also important to note that Australia has reciprocal healthcare agreements with 11 nations, including the UK, New Zealand and Italy.
This covers Australians travelling there for urgent medical treatment, however, often not the entire bill. Evacuations also aren't covered by reciprocal healthcare agreements.
What about lockdowns or border closures?
The most glaring omission from the Lees' travel insurance is coverage that would see them refunded travelling costs or compensated for rearranging plans in the event of general COVID-19 lockdowns or border closures.
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Southern Cross says providing this sort of generalised cover for travellers would simply be too expensive.
"Our customers also want affordable travel insurance, so our policies currently don't provide cover for lockdowns, which would expose us to much greater insured losses," the company explains.
"Were our policies to provide lockdown cover, they'd be less affordable, so fewer people would have insurance cover."
Yet, as the current situation in Europe highlights, lockdowns are still very much a consideration for travellers.
The Lees feel somewhat less nervous, knowing that their travel insurance covers them for contracting COVID-19 and associated medical and cancellation expenses.
They're both vaccinated but will still be travelling to San Francisco and then on to Los Angeles with caution.
"We're going to do rapid antigen testing twice a week while away," Beth says.
"We probably will not go into a restaurant to eat inside over there.
"We've thought about it and are taking as many precautions as we can. We want to see our family, we pray we'll get back there safely and come back safely."
They're still nervous about not being covered for rolling lockdowns or border closures.
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"That's the tricky one," Larry says.
"You could certainly book into a place and be left high and dry. That could be a problem.
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"We don't want to go into our superannuation. And it could take huge amounts of money."
The retired teachers have so far spent $10,000 on their short-term accommodation and flights to the United States.
Their flights aren't refundable but they may be able to get travel credits if their plans need to change.
They've intentionally booked short-term rentals where the cancellation policies say they can be given full refunds until just up to a few days before they're due to check-in.
"We love to travel, so we won't stop travelling," Beth says.
"We're aware of the fact that your travel plans can be up-ended at any time."
Is this the best COVID travel insurance on offer?
ABC News contacted a range of other major insurers that are offering overseas travel insurance, including Allianz, CoverMore and NIB.
None of them offers overseas travel insurance with COVID protections beyond what Southern Cross was selling, except CoverMore, which offers some general lockdown coverage for travel to New Zealand. (More on that later.)
Allianz is also offering customers a partial refund of the insurance that they paid for if they get caught out by general COVID-19 issues.
Pre-COVID, NIB was one of the bigger providers of travel insurance, with $200 million in premiums taken every year.
"But, of course, throughout COVID-19, things have been much tougher. And, you know, we've been losing money," NIB's chief executive Mark Fitzgibbon tells The Business.
NIB had to exit the market altogether this year after its financial backer — or underwriter — AXA ended its financial arrangement.
"Travel insurance is not the most popular category for global insurers at the moment, for obvious reasons," Mr Fitzgibbon says.
"We thought we had another underwriting arrangement in place but it fell apart at the last minute. So, frankly, we've had to scramble to establish a new underwriting partnership.
"We [now] have and, very soon, we'll be back online and selling travel insurance across Australia and New Zealand."
The NIB policy that will be on offer — underwritten by new backer Pacific International Insurance — will be very similar to the coverage offered by Southern Cross, without any protection for general COVID-19 lockdowns or border closures.
Mr Fitzgibbon says it's unlikely that NIB would ever offer this sort of coverage. He says this doesn't come down to the insurance companies who sell premiums, but the underwriters who carry the financial risk of paying out policies.
"You talk to people at some of the global underwriters, and they certainly confirm that it's not an insurable risk if the entire world shuts down and closes borders. The financial consequences are just too dire."
Unclear if premiums to rise dramatically
Mr Fitzgibbon says premiums will rise due to the extra pandemic coverage.
"There'll be a little bit of pressure on premiums as a result of that additional COVID cover, but we're talking maybe 5 to 10 per cent. Nothing particularly egregious," he predicts.
After a "collapse" in the market of 99.3 per cent at the start of COVID, insurance comparison website Compare The Market is currently experiencing a return of browsers looking for deals.
The website's travel insurance specialist, Warren Duke, says brands are also slowly re-entering the market.
"At this stage, we've not seen any travel insurers that have included cover if you need to cancel because of a border closure," he says.
"But we're all hoping that border closures and travel bans are a thing of the past.
"So, hopefully, that won't be much of an issue going forward.
"We've not seen prices change to a great degree at this stage. It's a little bit hard to tell because not all insurers have returned to the market.
"We're probably a couple of months away from understanding if the impact of introducing COVID-19 cover has had a dramatic impact on the price of policies."
What about add-on travel insurance?
Many people buy overseas travel insurance directly from companies, including Larry and Beth Lee.
However, there's also travel insurance that people sometimes buy when purchasing plane tickets or even the sort many get given for free by banks when signing up for credit cards.
The Australian airline Qantas halted sales of travel insurance during the pandemic.
ABC News has confirmed that it has just resumed selling travel insurance with a product offered through NIB, meaning people who buy travel insurance through the airline should get the general COVID-19 coverage that the insurer offers.
Online ticket sales website FlightCentre is also selling travel insurance through CoverMore which, as well covering people internationally if they catch COVID-19, offers additional protection including:
- For essential workers who have their leave revoked due to COVID-19 and can no longer travel
- If the person you were planning on staying with in Australia or New Zealand has to go into quarantine for COVID-19 and you need to find new accommodation
- If your accommodation in Australia or New Zealand is cancelled for a deep clean
- For refunds, if your holiday activities in Australia or New Zealand are cancelled due to COVID-19.
When it comes to free travel insurance offered to people when signing up for credit cards, it appears the coverage for COVID-19 is exceedingly limited.
ABC News looked at the policies for the big four banks. All exclude pandemics as a general rule.
"While there is a broad exclusion on pandemics, including COVID, this is consistent with other types of travel insurance across the industry," Commonwealth Bank said in a statement.
"We are looking at ways to offer broader cover to provide better protection for customers."
"The travel insurance offered through some CBA credit cards is complimentary. Customers can, if they choose, take up additional cover for extra cost."