Alisa Dolgova gave evidence.

Q The next evidence is from the Association of British Insurers. Good morning. Would you please introduce yourself?

Alisa Dolgova:

Hi. I am Alisa Dolgova. I am the manager looking after Brexit at the Association of British Insurers. We are a membership organisation representing more than 250 insurance and long-term savings firms in the UK, ranging across general, life and reinsurance companies.

Q Good morning, and thank you for coming to give evidence this morning. Could you set out the advantages of the EHIC scheme as the ABI sees them?

Alisa Dolgova:

I agree with those who gave evidence before me, in that the advantage of the EHIC is that it is a simple, easy-to-understand system. From an insurance perspective, the EHIC covers the medical treatment of UK nationals travelling through one of the covered countries, in the same way as local nationals would be covered in terms of state provision of healthcare. The insurance then covers anything that is not covered by EHIC, meaning things that are not covered by the state healthcare system—some countries have a greater tradition of state healthcare than others—but also things such as repatriation. The advantage of the current system continuing for customers is mainly that it is a system that is well understood, and there is a minimum that is covered for everybody, irrespective of whether they have travel insurance.

Q Specifically on travel insurance, if reciprocal arrangements were not in place, what would be the implications in terms of cost, and are there any other potential implications that we should understand?

Alisa Dolgova:

If EHIC were not in place, those costs would be covered by the person’s travel insurance, if they have insurance in place. That means that costs that are currently covered by EHIC would be borne by the insurer. I think £156 million is currently covered by EHIC, so part of that would be covered by the insurer, and that would have an impact on the claims costs for insurance companies—costs that currently are not there. That might have an impact on the premiums that insurers charge their customers.

Q Have you made any estimate of what the increase in premiums would be if reciprocal arrangements were not in place?

Alisa Dolgova:

That is difficult. Insurers do not know what the impact is going to be, because currently they do not have the data on where the policyholders travel to. By far the most common type of travel policy that is bought in the market is a multi-year insurance policy, which covers an individual who can travel anywhere in the EU—or the rest of the world, for that matter. Currently, because part of that is covered by EHIC, insurers do not have the breakdown, and it is therefore difficult to give a number for what might happen.

Q Do you have some indication of what the typical current premiums are for people with complex and acute conditions who travel to Europe, and what the premium increase would be if reciprocal arrangements were not in place?

Alisa Dolgova:

Generally speaking, premiums will be higher for two reasons: first, if the chance of the person claiming is higher, and secondly, if the volume of payout is likely to be higher—so, if someone has a condition that is particularly expensive to treat. That is why health is one of the risk factors that may increase premiums. Again, it is quite difficult to say what the difference in the potential increase would be between those who have existing conditions and those who are in good health, because it basically depends on where that group of people is likely to travel to, in terms of how expensive healthcare is in that country. For example, if someone travels to the US, that is a lot more expensive than if they were to travel to some other destinations. I would just say that if you look at countries where you do not have EHIC or reciprocal arrangements, insurance policies are available but it may require a bit more effort to locate the right product for the right individual. We are working with the Financial Conduct Authority, Macmillan and other organisations on that.

Q I want to ask you broadly the same set of questions, but specifically with regard to health insurance and what the implications would be if reciprocal arrangements were not in place for UK citizens travelling to the EU.

Alisa Dolgova:

Most private medical insurance policies in the UK are generally designed to cover treatment within the UK. It is relatively rare for the policies to also cover healthcare while you are travelling.

Q If reciprocal arrangements were not in place, you would have to have extra healthcare insurance to cover eventualities abroad and in the EU.

Alisa Dolgova:

Yes. It may vary depending on the type of policy, but generally speaking that is the most common situation.

Q Have you given any thought as to what the cost implications would be if you had to put those arrangements in place?

Alisa Dolgova:

For health insurance?

Yes, for health specifically.

Alisa Dolgova:

The implications for health insurance are a lot less than for travel insurance. Apart from that, health insurance would primarily be affected in the same way as any other insurance in terms of transferring data across borders. I am not sure there is likely to be a significant impact on health insurance if the reciprocal healthcare arrangements are not in place.

Q Given what we have just said and some of the implications for not having reciprocal arrangements in place, can I assume that in principle the ABI thinks that the Government are acting in the correct way to put in place reciprocal arrangements, or arrangements to make reciprocal arrangements?

Alisa Dolgova:

We are supportive of the Bill and giving the Government the powers they need to implement reciprocal healthcare arrangements. From the insurers’ perspective, the most important thing for us is to know as early as possible, whatever the outcome, so that insurers can plan for any changes and so that we can let our customers know what the impact is likely to be.

So, the sooner the Bill gets Royal Assent, the happier you will be.

Q On the cost point, I think some evidence was given to the House of Lords Committee that in a no deal you expected premiums to increase by between 5% and 10%. Does that sound like a familiar figure?

Alisa Dolgova:

My colleague Hugh Savill gave evidence to the House of Lords, where he stated that there is likely to be an increase of between 10% and 20%. To be honest, we do not really know, because it very much depends on the particular insurer, who it insures and where that specific group of people travels to.

Q In that context, what advice are you giving to people about insurance requirements post 29 March 2019?

Alisa Dolgova:

The main message that insurers are giving to the customers is that it has always been important to have travel insurance because it covers things that EHIC does not, but it will be even more important to have it in case there is not a transitional period, because travellers would no longer have the benefit of EHIC. The message is that you need to have travel insurance in place, and that travel insurance will cover you, irrespective of whether you have EHIC.

Q Has there been an increase in premiums because of that added uncertainty, do you know?

Alisa Dolgova:

We have not currently seen an increase in premiums. Firms are currently pricing in the assumption that there will be a withdrawal agreement in place with a transitional period that will allow more time for the Government to enter into a reciprocal healthcare arrangement.

Q In the event that there are not arrangements in place, have your members done any work on the number of people who might not be able to travel, because they effectively become uninsurable or the premiums are so high that they are prohibitive?

Alisa Dolgova:

I have briefly alluded to the work that we have been doing with the Financial Conduct Authority. The FCA published a feedback statement in June this year, looking at travel for people with pre-existing conditions. The finding was that there are products available on the market but they may be difficult to locate at the moment, which is why we are doing additional work at the moment. So there are products available that will cover people.

Q I appreciate that. There will almost always be a product; it is the size of the premium that can dictate whether that product is really available. Have you looked at the potential size of premiums in those situations? Are there particular pre-existing conditions that people might have that will have a negative impact on the size of the premium?

Alisa Dolgova:

I do not have information with me about which types of conditions are more expensive than others, but it will be the types of conditions that are more likely to require treatment while you are travelling, and insurers do take factors into account such as, “What has been your recovery time?”

Q My final question is about the overlap between EHIC costs and insurance costs. I had a recent example in my constituency of a constituent who came back from Spain with a medical bill for £15,000. It was not for repatriation costs; it was purely for medical treatment. Obviously, the question is, why is that not covered by the normal arrangements? How often does that situation arise, and can you give me some insight as to why that might be happening?

Alisa Dolgova:

Yes, sure. EHIC covers you for public healthcare in the same way as a person from that country would be covered, and healthcare provision differs a lot, depending on which EU country you are in. Some countries, such as Italy, have healthcare systems that are much closer to the NHS than others, and if you travel there, EHIC will give you greater coverage. Some countries, such as Spain, have a mixed public/private system and some countries, such as Germany, have a greater tradition of private healthcare. Actually, that means the degree you are covered by EHIC varies depending on where you travel and that is why you need insurance.

Q Okay. I think my constituent’s situation was an emergency and I do not think that any consideration was given to the type of hospital. I think that what you are saying is that reciprocal arrangements do not necessarily give you the same or equivalent coverage in other countries, because it depends on the system that operates there.

Alisa Dolgova:

Yes. It will give you more coverage across all countries, but what that coverage is depends on what the situation is in that country.

You said that private insurance policies cover the areas above the benefits of the EHIC. But is it not the case that those of us who take out private travel insurance policies precisely for the healthcare benefits may not make use of EHIC? And is it the case that, because of that, the premium costs for private travel insurance are less, given that those of us who take out private insurance might not use EHIC and might rely on the private healthcare side instead?Q

Alisa Dolgova:

It depends on the specific terms of the travel insurance policy that you have. For example, some policies have a specific provision that you need to use EHIC first and then have resort to your insurance policy, and insurers may also provide incentives to use EHIC as well. For example, they might provide a waiver for access costs of EHIC; that has been used.

Q What I am trying to ask is whether it might be the case that, without this Bill and without reciprocal arrangements, the cost of travel health insurance is likely to go up? Those of us who take out these policies are not necessarily reliant on EHIC, because we would refer to the private claim, whereas others who perhaps do not have healthcare benefits under a travel insurance policy would be entirely reliant on EHIC. What I am trying to tease out is whether, without this Bill, the healthcare side of travel insurance—the premiums—would potentially go up?

Alisa Dolgova:

The claims cost will definitely increase, which may lead to an increase in travel insurance costs as well.

Q Out of interest, can I ask you a really simple question? What happens currently, but also perhaps in future, when someone is abroad and has an injury, an accident or whatever for which some form of implant is required, and that implant subsequently fails when the person returns to the UK and it is not supported by the NHS? Where does the cost burden fall and how does that impact on insurance, and how may that work in future if we do not have regulatory alignment?

Alisa Dolgova:

Sorry, your question is who would pick up the cost if treatment were provided overseas, but it fails?

Yes. If that implant failed, whatever it might be, and the cost to revise that implant were then borne by the NHS, who picks up the cost, and how does that work? How does it work currently, and how might it work in the future based on this?

Alisa Dolgova:

I am not sure I have a detailed enough answer to give at the moment. I would be happy to come back to the Committee on that, but again, I think it would ultimately depend on exactly what travel insurance policy is in place. I would assume that the travel insurance policy is likely to cover a person for the treatment they receive overseas, and if they then need additional medical treatment back in the UK, they would be treated within the UK healthcare system in the same way as they are currently.

Are there any more questions from members of the Committee? If not, I thank you very much for helping the Committee with its deliberations on this Bill, and I call the next witness.