As UK Covid-19 restrictions come to an end, Brits are booking summer holidays once again. Sam Barrett looks at what that means for the travel insurance market
As travel restrictions lift, holiday bookings are returning to pre-pandemic levels, with research conducted in January by comparethemarket.com showing that a third of Brits had already booked their 2022 holidays. But with Covid-19 still having the potential to derail travel plans, insurance has a key role to play in restoring confidence.
The shift from pandemic to endemic is welcome news for Anthony Kaye, managing director of Campbell Irvine and chairman of the Association of Travel Insurance Intermediaries.
“It is like coming out of hibernation,” he says. “We have spent the last couple of years mainly processing refunds but towards the end of 2021, the switch was thrown and everyone is going on holiday again.”
Right cover
Travel insurance is fundamental to this renewed confidence, with insurers offering much broader cover to assuage travellers’ concerns. “People will only commit if they have the right cover,” says Mr Kaye. “If they can’t get a Covid guarantee from the travel company, then they want the reassurance that it is included in their travel insurance.”
Comprehensive insurance now includes cover for Covid-19-related medical expenses but also cancellation if a positive result prevents or disrupts a holiday. Insurers are also extending their cover to pick up other concerns that can potentially ground travel plans. As examples, Staysure offers an add-on for travel against Foreign, Commonwealth & Development Office advice, while tifgroup has added cover for a delayed rapid PCR test result causing an individual to miss their flight.
Ryan Howsam, founder and CEO of the Staysure Group, expects these Covid-related covers to remain in place on travel insurance policies. “Customers want the reassurance of this cover,” he says. “Covid-19 might end up as nothing more than a cold but the uncertainty we have seen in the last couple of years means this cover will be around for some time.”
Behavioural shift
Alongside new covers from travel insurers, the way consumers purchase policies has also changed. “Customers are a lot more aware of the protection they want,” says Charlotte Field, director of insurance at tifgroup.
“Our customer service call lengths have increased as a result of customers actively checking their policy wordings to make sure the cover they desire is included.”
More people are taking out cover earlier too. Figures from GoCompare show that while people took out cover an average of 25.2 days before their trip between January and June 2019, this average increased to 76.1 days during the same period in 2021.
Matt Sanders, travel insurance spokesperson for GoCompare, says this is a positive shift. “They understand the need to protect against cancellation and disruption in times of uncertainty,” he says. “Concerns around cover also mean that more customers are opting for higher levels of cover by selecting five-star policies.”
It is not all positive though. Research by comparethemarket.com found that 17% of Brits considering a holiday abroad this year were still unlikely to take out cover.
£90.8bn
The global travel insurance market size was valued at £9.4bn in 2020 and is projected to reach £90.8bn by 2030, growing at a compound annual growth rate of 26.1% from 2021 to 2030.
Source: Allied Market Research
Market dynamics
The insurance market has also shifted considerably, with some insurers finding the last couple of years more challenging than they had expected. “The market has contracted significantly and capacity is an issue,” says Mr Kaye. “The claims ratios are higher than before the pandemic and there’s also a disproportionate level of regulation required for what is essentially a low-cost policy.”
Insurers have certainly taken a significant hit as a result of the pandemic. Estimates from the Association of British Insurers indicate that at least £275m was paid out to travel insurance customers for cancellations and disruption costs incurred overseas during the first few months of the pandemic.
This hit on capacity, coupled with the additional cover and rising medical costs, means average premiums have increased.
According to comparethemarket.com, the average of the top five cheapest premiums for a multi-trip policy has fluctuated between £63 and £79 since the beginning of January 2021, with the most recent average £66. Single-trip cover has seen much more of a hike. At the beginning of 2021 the average was £13 but this has now increased to £28.
Mr Kaye says that some segments of the market have been particularly hard hit. “More mature travellers looking to go long haul will see the largest increases as a result of the increase in medical costs, while anyone covering children will be least affected,” he says, adding that the average increase is around 20%.
Adapting to the post-pandemic world means there’s still plenty of uncertainty ahead. Ms Field says she is watching closely how medical facilities will respond to the return of travellers but adds that she’s optimistic. “Some companies took the pause in travel to evaluate their business models and implement changes,” she says. “Remote working has also been a huge success and could be attractive when recruiting.”
Mr Howsam also believes the sector has a bright future. As well as seeing business volumes up on pre-pandemic levels, his firm has taken on 300 people during the last months and is looking for more recruits. “People do want to travel again,” he says. “Significantly, as a result of the pandemic, more of them realise the value of taking out a policy.”
Sam Barrett is a freelance journalist
