The spread of COVID-19 has paused and curtailed the sale of travel insurance. However, as travel restrictions continue to ease, insurers are attempting to close gaps in a market where COVID-19 continues to circulate by taking on greater risk and this will affect payouts.
GlobalData’s 2019 UK Insurance Consumer Survey found that the most common reason for claiming on travel insurance last year was medical claims, with 31% of respondents citing this reason, while cancellations were the second highest with 29%.
According to the Association of British Insurers (ABI), both medical claims and cancellations make up over 60% of the cost of claims for the travel insurance market. The cost of travel insurance claims has generally increased over recent years and reached a record high in 2018, costing insurers £399m, although it decreased slightly to £377m in 2019. The ABI further estimates that travel insurers have paid at least £275m in COVID-19-related claims for the first quarter of 2020.
However, despite the associated risk of these claims in the travel insurance market, the gradual easing of travel restrictions means an increasing number of insurers are reincorporating coronavirus-related repatriation and medical expenses as well as cancellation coverage. These providers include Blue Insurance, Allianz, Caster, and Staysure. The revamp of products comes after a temporary pause on sales of new travel insurance policies implemented by insurers between April and July 2020. While the products’ new features will give a greater peace of mind for consumers, insurers need to be wary of the possible financial risks associated with taking on a wider number of medical and cancellation claims. Meanwhile, UAE-based airline Emirates has introduced an insurance product to cover all of its passengers for COVID-19-related claims.
If more insurers begin to include COVID-19-related medical and cancellation claims as part of their standalone insurance products, the travel insurance claims market could hit record levels. However, despite the potential risks associated with higher claims, the integration of these offerings during unprecedented times is a good move by travel insurers to gain customers’ trust and increase their market shares in the longer term. Payouts after COVID-19 can really aid the travel insurance sector.
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