The travel insurance industry has encountered significant volatility over the last few years. With travel coming to a standstill during the pandemic, and now the number of globetrotters surging, it’s no wonder we’ve stood witness to evolving trends in the travel insurance space. However, as the industry continues to expand, it also faces numerous challenges in adapting to new market dynamics and meeting new regulatory requirements.
In our most recent webinar, we explored the evolving trends and regulatory challenges facing the travel insurance market, with help from our guest panellist Graeme Hamilton - a seasoned travel insurance expert from Jackson Lee Unwriting.
When reflecting on the status of the travel insurance industry, Graeme described it as being in recovery: “The pandemic caused consumers to stop travelling altogether. As things started moving again, then we had the flight cancellations, which was another big problem to deal with. 2023 is the first year where we can get back to business as usual. Things are on the up!”.
In contrast to this positive outlook, fellow panellist Consumer Intelligence CEO, Ian Hughes, shared a word of warning: “Right now, the travel insurance industry is caught in the crosshairs of heightened customer expectation and the regulator who is focused on eliminating consumer harm – and in travel insurance there’s huge potential for harm for customers that don’t have the right cover.”
Changing trends
To bring to life the impact of external forces on the industry, our final panellist Max Thompson – Insurance Insight Manager at Consumer Intelligence – walked the webinar audience through key trend changes seen in pricing and consumer behaviour.
He revealed that around 6% inflation has come in to the new business market over the last twelve months - a lesser increase than seen for other personal lines products. The most competitive products, appearing in the P1 position on Price Comparison Websites have seen a decrease in average quoted premium since the beginning of the year, however over the last 12 months, they too have been subject to slight inflation.
Max explained: “It’s a sign of the times to look at 6% inflation and think “that’s not so bad”! Thankfully, travel is a lower average premium product, so these increases shouldn’t make or break a holiday. Increased prices could make customers choose between coverage levels, however.”
“There’s pressure not to increase price as it’s a competitive space. The cost of claims is increasing so there's pressure to put price up. The industry is doing its best to maintain the status quo”, commented Graeme.
In July, we surveyed just over 1000 consumers to find out how their behaviour and expectations have changed over the last 12 months.
Whilst countries across mainland Europe remained the most popular holiday destinations among those surveyed, we saw an increase in popularity for more obscure and far flung destinations.
Max explained: “Countries that could be perceived as colder are seeing a jump in popularity such as Belgium, Switzerland, Netherlands, which could be a sign of people trying to avoid extreme temperatures seen in recent summers. Also, places such as South America and Thailand, traditionally bucket list destinations are seeing a popularity bump too. Could this be due to a realisation post-covid that life is too short not to do the things you’ve always dreamt of?”
Regulatory challenges
The panellists went on to discuss the challenge presented by the FCA’s latest big regulatory change, the Consumer Duty, which came into force on 31 July.
Graeme emphasised the size of the mountain the industry has to climb: “It’s big in terms of the FCA’s expectations. It’s a level of complexity not seen before at a macro level. It takes a lot of resource and that’s what the industry has been wrestling with for the past six months.”
Max went on to reveal that outcome 4, Consumer Understanding, likely posed the biggest challenge of all: “When we asked consumers about their understanding of what Covid cover their policy afforded them, only 36% said they had read the fine print of their policy. That means two thirds said they were pretty sure, assumed the cover would be there or just had no idea. When we delve further into policy understanding for specific coverages, we can see that there are some misconceptions among consumers."
Misunderstanding leaves the opportunity for consumer harm wide open. Ian explained that due to complex policy wording or sometimes oversimplification in summary documents, consumers can be left believing they are covered when they’re not.
Key takeaways
At the end of the session, each panellist shared their key takeaway for those tuning in. Among the words of wisdom, it was clear that travel insurers need to stay on the ball when it comes to pricing. Claims costs and evolving consumer trends mean underwriters will not be able to rely on history as much. Listeners were also encouraged to focus on repairing the disconnect between consumers and insurers is vital so that misunderstandings and future consumer harm can be avoided.
Catch up on the full webinar!
This article has only scratched the surface of what was shared and discussed in our 45 minute webinar. To make sure you don't miss out on furtherdata and insights, tune into our webinar recording.
Comment . . .
Submit a comment