This last year, we saw the travel industry bounce back from the dip it experienced as a result of imposed restrictions during the pandemic. For many travellers, the pandemic may have highlighted just how important it is to get adequate travel insurance to cover your trip.The UK’s appetite for travel hasn’t been so high in years. Phil Denman, CEO of Capacity Insights, takes a look ahead to next year and the future trends in travel cover.
According to Mintel’s UK Travel Insurance Market Report for 2023
· The value of the travel insurance market is expected to continue to increase in the coming years.
· Single-trip policies seem to be the preferred option, as it’s viewed as the fastest and most affordable way to get cover for upcoming holidays. 33% of travellers plan to buy a single-trip policy for their next excursion.
· 74% of travellers think that the cost of living crisis has made travel insurance more important than ever.
· However, the cost-of-living crisis means that many travellers are looking to make savings wherever they can. Far too many may be travelling without adequate insurance cover. Insurers can respond to this through making their cover as accessible, and affordable, as possible.
With all this in mind, let’s take a look at what UK consumers can expect from travel insurance in 2024, and beyond.
More Bespoke and Flexible Policies
When it comes to travel insurance, providers have always found it challenging to understand just what customers want and need from their cover. No two travellers are quite the same. All have different cover requirements based on their personal circumstances (such as their age and medical history), and the specific trip they’re undertaking.
As a result of such a vast array of customer expectations, it’s always been a challenge for providers to design travel insurance products that truly meet their customers’ needs.
Travel insurance has never been an off-the-shelf, one-size-fits-all product. But in the coming years, as customer expectations evolve, expect a rise in bespoke travel insurance policies that are tailored to each individual traveller’s unique needs.
The Rise and Rise of Embedded Insurance
The cost of living crisis has made travel insurance more important than ever with consumers needing to know that their hard earned money spent on holidays and travelling isn’t going to be wasted.
But how many of these travellers are getting their cover directly from insurers? Many may be getting their cover as part of an embedded insurance arrangement.
Embedded insurance means allowing customers to get specialist cover as part of a wider purchase. Or companies including it as an additional benefit to buying another product. For example, some banks include travel insurance as a benefit when their customers sign up to certain bank accounts.
It could also be buying cover for cancellation or lost baggage directly from a tour operator, hotel, or airline at the same time as a consumer buys their plane ticket or books their hotel room, usually in the same transaction.
In recent years, embedded insurance has made it easier than ever for consumers to get the cover they need, exactly when they need it. It means fewer travellers than ever are risking underinsurance through travelling without sufficient cover.
We might expect embedded insurance to become the industry norm in the coming years. It may become possible for customers to purchase highly sophisticated travel insurance policies without ever talking to an insurance company.
Simple, Streamlined Parametric Cover
In the 30 years I’ve been doing travel insurance, predominantly insurers have focused on three main areas: medical expenses, cancellations, and baggage.
In recent years, Fintech and embedded brands have started to provide more stripped down, high engagement products. They’re trying to reposition travel insurance as a simpler, less complicated product so that their technology can be more effective in delivering it. And “simpler and less complicated” might be exactly what most customers want from their travel insurance.
Essentially, parametric cover means that, instead of indemnifying the exact loss experienced, customers instead receive an agreed payment following a certain triggering event. With parametric baggage insurance, customers will receive a set amount in the event that they lose their baggage or a set amount should their flight get cancelled. And so on.
We may also see a rise in parametric cover for certain weather events. In 2023, the Cerberus heat wave and widespread forest fires caused travel chaos for many. Though most insurance products offer some kind of catastrophe cover, parametric policies can make things much simpler. Insurers can offer straightforward cancellation and repatriation guarantees based on certain weather events, such as the temperature getting above or below a set of minimum or maximum comfortable values.
AI Could Make Everything Easier
It feels like everyone’s talking about how AI is going to shake up every industry, and travel insurance is no different.
Customers want things to be simple and straightforward, and embedded and parametric insurance products can help streamline policy purchases. But with AI, insurers can continue to deliver tailored policies even as the purchasing process gets increasingly streamlined. AI allows insurers to offer bespoke cover without making things overly complicated for the customer.
AI can leverage huge amounts of customer data to tailor cover based on a traveller’s unique circumstances. It can automate personalised pricing, cover, and policy recommendations. And it can do this immediately, which means that the customer can get an instant and accurate response to any inquiry. Meanwhile, workflow automation tools can automate the claims process, allowing customers to quickly access the support they need as soon as possible.
About The Author
Phil Denman is the CEO of Capacity Insights and an insurance expert with over 30 years experience. Having held senior roles in underwriting, sales and operations with several leading UK travel insurance companies, Phil founded Healix Insurance Services, a specialist intermediary business specialising in large, complex travel insurance schemes in 2005.
About Capacity Insights
Capacity insights in a UK-based specialist underwriting MGA backed by ‘A’ Rated Insurers for medical, dental, travel and personal accident insurance. They create bespoke underwriting solutions based on market insight, data science and a commitment to exceptional customer service. Capacity Insights work in partnership with SMEs and corporates to deliver tailored insurance solutions that truly benefit employees. To learn more visit: https://capacityinsights.co.uk
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