How will travel take off again?

Few indus­tries have been hit hard­er by coro­n­avirus than trav­el and, with hol­i­day­mak­ers and busi­ness trav­ellers forced to stay at home for much of the past year, demand for trav­el insur­ance has unsur­pris­ing­ly plum­met­ed.

As the pan­dem­ic set in, there was much con­fu­sion among trav­ellers with insur­ance poli­cies over who was respon­si­ble for pay­ing out when their plans were can­celled or cur­tailed.

But now the pic­ture is becom­ing clear­er and, ahead of the UK’s bor­ders open­ing up, insur­ers have worked hard to make cov­er lev­els and exclu­sions easy to under­stand.

How­ev­er, accord­ing to Defaq­to, there is still a wide vari­a­tion of cov­er for peo­ple to nav­i­gate. Its research this March found that while 73 per cent of the 978 sin­gle-trip poli­cies it checked would cov­er can­cel­la­tion fol­low­ing a pos­i­tive COVID test, just 32 per cent would cov­er it due to self-iso­la­tion. 

Addi­tion­al­ly, only 2 per cent would cov­er the costs of being quar­an­tined abroad and none offered cov­er for can­cel­la­tion due to fur­ther lock­downs.

Anna-Marie Duthie, trav­el insur­ance expert at Defaq­to, explains that most insur­ers will now cov­er the costs of med­ical treat­ment if you catch COVID on hol­i­day. But she says: “Com­pared with the start of 2020, the trav­el indus­try has already seen a fall of around 15 per cent in the num­ber of trav­el insur­ers and poli­cies in the mar­ket. It is like­ly that many of these insur­ers will not return.

“We have already seen trav­el pre­mi­ums increase since the start of the pan­dem­ic. Insur­ers will be pric­ing to take account of the loss­es they have suf­fered, but it is still a com­pet­i­tive mar­ket so recoup­ing large loss­es will be dif­fi­cult. It is unlike­ly though that we will see the return of the very cheap trav­el poli­cies, such as those which exist­ed at the start of 2020.”

Antony Mar­tin, man­ag­ing direc­tor of trav­el insur­ance com­pa­ny Insurefor.com, agrees. He says trav­el insur­ance poli­cies have already had price ris­es of around 15 per cent to take account of COVID cov­er. 

“There have been sig­nif­i­cant income loss­es due to cus­tomers not trav­el­ling, but this has not impact­ed insur­ance per­for­mance, so we do not expect rates to increase much fur­ther over the next 12 months,” says Mar­tin.

A travel insurance claim is not the first step

When it comes to trav­el pro­tec­tion, much is already offered by trav­el providers in the first instance, and many experts believe they will have to shoul­der more risk going for­ward.

The Asso­ci­a­tion of British Insur­ers (ABI) says the trav­el insur­ance indus­try has paid out an esti­mat­ed £152 mil­lion since the pan­dem­ic began, but explained how trav­el insur­ance is not an alter­na­tive to any legal oblig­a­tions on oth­ers, cit­ing its main pur­pose is to pro­vide emer­gency over­seas med­ical cov­er.

The ABI says that, where there is pol­i­cy cov­er for those forced to can­cel their trav­el plans or who have faced trav­el dis­rup­tion due to COVID, it will kick in if refunds are not first­ly obtain­able from air­lines, accom­mo­da­tion providers and tour oper­a­tors, as well as via sec­tion 75 cred­it card refunds and deb­it card charge­back claims. 

Sarah Brodie, ABI gen­er­al insur­ance pol­i­cy advis­er, explains: “Cus­tomers should check the terms and con­di­tions as poli­cies sold since COVID-19 was declared a pan­dem­ic are like­ly to con­tain some exclu­sions for can­cel­la­tion cov­er. Trav­el insur­ance is designed and priced to cov­er unfore­seen risks when the pol­i­cy is tak­en out. It is impor­tant to note that it is the pol­i­cy­hold­er’s respon­si­bil­i­ty to meet any bor­der require­ments, for exam­ple a neg­a­tive COVID-19 test.

“No insur­er seeks to hide behind numer­ous terms and con­di­tions, and trav­el insur­ers will con­tin­ue to do all they can to ensure poli­cies are as clear and as user friend­ly as pos­si­ble to give trav­ellers the reas­sur­ance they need.”

Nicky Kelvin at advice web­site The Points Guy UK also believes this clar­i­ty will be para­mount. “Small print when it comes to COVID-19 will like­ly have to become more trans­par­ent,” he says. “Com­par­i­son sites are already show­ing which poli­cies have such cov­er and cus­tomers may be choos­ing poli­cies on this basis, so insur­ers may have to be more trans­par­ent to remain com­pet­i­tive.”

Time for change within the travel insurance industry

Matt Con­nol­ly, of Sønr, a mar­ket intel­li­gence busi­ness that tracks insur­ance inno­va­tion around the world, believes the pan­dem­ic should sig­nal a chance for trans­for­ma­tion, espe­cial­ly when it comes to mak­ing the claims process more seam­less with dig­i­tal tech­nol­o­gy.

One trend being explored by a num­ber of insur­ers is para­met­ric insur­ance, where a cus­tomer takes insur­ance out and if their trip does­n’t hap­pen for some rea­son, the claim is imme­di­ate­ly trig­gered and mon­ey refund­ed. 

Con­nol­ly says: “My rec­om­men­da­tion to insur­ers is study the inno­va­tion tak­ing place in the mar­ket and cap­i­talise on the oppor­tu­ni­ties out there. If your strat­e­gy is to copy what’s already in-mar­ket, what you’re actu­al­ly copy­ing is the arte­fact of past effort.”

Avi Meir, co-founder and chief exec­u­tive of busi­ness trav­el man­age­ment com­pa­ny Trav­elPerk, believes flex­i­bil­i­ty must now be the over­rid­ing prin­ci­ple. “Thanks to an ever-chang­ing patch­work of reg­u­la­tions and restric­tions, a trav­eller now does­n’t know that their jour­ney won’t be dis­rupt­ed, delayed or can­celled until their plane takes off,” he says. 

“That per­va­sive uncer­tain­ty means tra­di­tion­al insur­ance poli­cies just don’t cut it; they were designed to cov­er for rare, one-off dis­rup­tive events, not an ever-present need for almost unlim­it­ed flex­i­bil­i­ty.

“Just as trav­ellers have adjust­ed to the ‘new nor­mal’, providers too need to reassess and adapt their offer­ings to cater for what trav­ellers now need most: flex­i­bil­i­ty.”