Is Travel Insurance a scam?

[fastupslowdown]

In booking a flight for an upcoming cycling trip I wound up cancelling two bad flights prior to finding a better deal. Both booking services conveniently forgot to cancel the 3rd party flight insurance requiring follow-up phone calls and/or emails. Are they betting that some percentage of customers will ignore the $35 -$55 insurance payment simply happy enough to get out of paying for the flight?

I hope rant doesn't earn me an aluminum foil hat, but lots of pricing theory focuses on small priced items and betting customers don't cancel promptly -Mike G

[NYCfixie]

In booking a flight for an upcoming cycling trip I wound up cancelling two bad flights prior to finding a better deal. Both booking services conveniently forgot to cancel the 3rd party flight insurance requiring follow-up phone calls and/or emails. Are they betting that some percentage of customers will ignore the $35 -$55 insurance payment simply happy enough to get out of paying for the flight?

I hope rant doesn't earn me an aluminum foil hat, but lots of pricing theory focuses on small priced items and betting customers don't cancel promptly -Mike G

My wife and I have purchased Travel Insurance for 2 different expensive trips over the past few years. One time nothing happened so it was a waste. The second time we lost a day in London so they covered the pre-paid hotel night and then they lost our baggage for two days so they covered some clothing and related expenses. Over 2 trips it was a wash.


For us, I think we would always get it because $150-$250 to cover a trip that may cost up to $10,000 is worth it but I would never get it through the airlines. We get it through a partner of our insurance company and it covers almost everything:
Travel Insured

And I am not sure it is a scam either. For our latest trip I booked on United. Within 24 hours I realized that our coach plus tickets would not matter since United is now cramming 10 seats across on a 777 (where they used to have 9) so coach plus might give us more legroom but side to side we would still be on top of other people; I cancelled and re-booked on Delta. Since we were within the 24 hour cancellation our ticket fee was immediately refunded but for some strange reason I had to go through a different process to get the seat upgrade fee refunded. I would not say it was a scam but I would say WTF - just refund the entire fee on cancellation.

[fastupslowdown]

My wife and I have purchased Travel Insurance for 2 different expensive trips over the past few years. One time nothing happened so it was a waste. The second time we lost a day in London so they covered the pre-paid hotel night and then they lost our baggage for two days so they covered some clothing and related expenses. Over 2 trips it was a wash.


For us, I think we would always get it because $150-$250 to cover a trip that may cost up to $10,000 is worth it but I would never get it through the airlines. We get it through a partner of our insurance company and it covers almost everything:
Travel Insured

My rant is not directed at the value of having a plan, but that the 3rd party booking agents don't automatically cancel it when the flight purchase is terminated.

[vertical_doug]

If it quacks like a duck, its a duck.

It's like the way JPM Chase tries to continually slip valued added fee services into your credit card bill. Another quacker.

[NYCfixie]

I edited my last section at the same time you posted so I agree, it sucks. They make it more difficult than it needs to be to get "all" of your money refunded, for no reason, so you may be correct.

[David Tollefson]

I look at it the same way I see all the "free for three months, then just cancel" offers. They prey on people forgetting to cancel, and then get charged. I refuse to accept any of those offers, and usually won't do business with companies that do so.

[j44ke]

A lot of industries use financial titration as a way to work against each customer's cost/benefit frustration threshold. Some people will chase a nickel, others stop at a dollar, multiple dollars, etc. Utilities and banks are super skilled at that. My mother used to spend hours on the phone to get $5 off our phone bill that suddenly appeared as a monthly fee for "line maintenance" or some other thing. But it worked - she'd get it eliminated. But every other person would say "Oh our phone bill just went up" or not even notice it. On volume, that $5 adds up. I think Time Warner made billions when they decided to charge rent of $3.99/month on their Internet modems. Some people bought their own modem to avoid the fee, and so now that they are Spectrum, Time Warner is arguing that current regulation doesn't mandate that they separate out the cost of the modem fee from the rest of their fees - that's only for television-top boxes, not for Internet modems. Why? Because they want to charge everyone the modem fee, even if the person is providing their own modem, and it is harder for the individual to see that they are being charged for a modem if that fee is not recorded on their bill separately.

In the world of tacit monopolies in almost every category of services deemed to be necessities, there is marginal investment in infrastructure and marginal investment in innovation in order to maximize return on investments made many years ago. If you aren't offering better service or more features in a product, the only way to make more money on the same old same old is to apply corporate creativity to the fees and limit (or convolute) the options for refund or reduction. Our product is new and improved! You get the same thing and we get improved profits!

[fastupslowdown]

A lot of industries use financial titration as a way to work against each customer's cost/benefit frustration threshold. Some people will chase a nickel, others stop at a dollar, multiple dollars, etc. Utilities and banks are super skilled at that. My mother used to spend hours on the phone to get $5 off our phone bill that suddenly appeared as a monthly fee for "line maintenance" or some other thing. But it worked - she'd get it eliminated. But every other person would say "Oh our phone bill just went up" or not even notice it. On volume, that $5 adds up. I think Time Warner made billions when they decided to charge rent of $3.99/month on their Internet modems. Some people bought their own modem to avoid the fee, and so now that they are Spectrum, Time Warner is arguing that current regulation doesn't mandate that they separate out the cost of the modem fee from the rest of their fees - that's only for television-top boxes, not for Internet modems. Why? Because they want to charge everyone the modem fee, even if the person is providing their own modem, and it is harder for the individual to see that they are being charged for a modem if that fee is not recorded on their bill separately.

In the world of tacit monopolies in almost every category of services deemed to be necessities, there is marginal investment in infrastructure and marginal investment in innovation in order to maximize return on investments made many years ago. If you aren't offering better service or more features in a product, the only way to make more money on the same old same old is to apply corporate creativity to the fees and limit (or convolute) the options for refund or reduction. Our product is new and improved! You get the same thing and we get improved profits!

financial titration is as good a term as any. my bank forced me to switch from visa to mastercard so they could give me a "consistent user experience". they alerted my garage to the credit card change but the garage failed to maintain the auto-pay i signed up for and dinged me a $25 late fee. I have yet to argue for the refund

[mmoore]

Yep, I call our cable provider every year to get on a new promotion. Much like your mother @j44ke

When I called the last time the rep tried to get me on a 6 month promo. at $118/mo. I asked if they had any longer promotions going. he said "yes, 1 year but it is more expensive". to which I asked how much and the answer was a blunt $118/mo. they will hide what they don't want you to see and hope you stomach it. chances are if I were on a shorter promo I would forget and be dinged the higher non-promo rate and have to spend another 15 minutes fixing it on my lunch break.

I wouldn't consider myself cheap (says every cheapo ever) but knowing that a phone call will save me $300/year makes it worthwhile.

[nrs5000]

financial titration

This term is genius. So true.

[guido]

We were scheduled to do a trip the year my SO got cancer. The travel insurance covered both flights trip packages, the works. It took a couple calls and faxes but it saved us a tun of money and frustration.

[ABiCi]

I always travel with insurance. Last I had a bike stolen while travelling in Germany last year. Insurance gave me the money for a new replacement. Three years ago I was hit by a car while riding in Colorado, fractured vertebra, bleeding on the brain. Insurance covered all of my medical costs. So, from those two incidents alone, I am thousands of dollars ahead of where I would be if I didn't have it. In both cases the claims process was very straightforward. I wouldn't ever leave the country without it.

[fastupslowdown]

I always travel with insurance. Last I had a bike stolen while travelling in Germany last year. Insurance gave me the money for a new replacement. Three years ago I was hit by a car while riding in Colorado, fractured vertebra, bleeding on the brain. Insurance covered all of my medical costs. So, from those two incidents alone, I am thousands of dollars ahead of where I would be if I didn't have it. In both cases the claims process was very straightforward. I wouldn't ever leave the country without it.

The scam isn't the insurance, but how they don't refund the price when you cancel the flight Next time I'll write a better head-line.

[Vandenberg]

I'd say the insurance not being cancelled is as simple as it being on another system, or the operator having to open a separate application. The operator is probably thinking "cancel flight" but there's no prompt to "cancel insurance" at the same time.
It could just come down to this: Never attribute to malice that which is adequately explained by stupidity.

That said, as noted above, it definitely happens.

[znfdl]

My wife and I had a cancelled scuba trip due to a hurricane and recovered $4k out a $5K outlay.

This is the only time that we have had to use trip insurance. Most other times it has been a cost. However, to date, we are probably ahead due to the scuba trip reimbursement.

[xjoex]

My folks were on a Alaska cruise a few years back, my pops had some medical issue pop up.... He was in the hospital for a week, my mom was in a hotel, they had to cancel all flights etc. Trip insurance covered everything including the hotel and hospital stay.

-Joe

[dogrange]

I used to think it was a scam, but now I wish I had purchased it for my upcoming trip as we may need to cancel due to some family health issues and we are $3k in on a rental house with a no-refund policy! We'll see and I'll learn from this, for sure. We'll probably end up just going, but still . . .