As the travel industry gears up to reopen post-lockdown, a spike in claims could impact insurance capacity 

With the government’s plans to resume international travel from 17 May, holidaygoers are at the ready - but travel insurers and brokers are now facing new risks and challenges. 

A spike in claims during the Covid-19 pandemic, due to holidaymakers having to cancel plans, could cause capacity to contract. 

Plus, measures designed to mitigate the spread of coronavirus, such as vaccine passports, post-travel quarantining and Covid-19 testing, introduces new risks, opening insurers up to potential litigation for travel cancellation, while brokers could face criticism. 

For example, the government’s new traffic light system for travel - which allocates a risk level to destinations - is subject to last minute changes. This could then leave customers facing huge costs for repatriation and accommodation because some insurers are not including cover for alterations to the government’s Covid-related rules within their policies.

Insurance Times explores why the travel insurance market might harden, the new challenges and emerging risks that brokers and travel insurers might face in a post-pandemic climate and whether this is an opportunity for the industry. 

Capacity contracting 

Sarah Crowther, partner at international law firm DAC Beachcroft, told Insurance Times: ”The hard and soft market cycle is dictated by supply and demand; in a hard market, demand outstrips supply.

”In the case of travel insurance, it is possible that capacity will contract as a result of the recent spike in claims as travellers were forced to cancel their plans. [Plus, there could be] a shift in underwriting appetite given the ongoing uncertainty around foreign travel.”

A recent study by personal finance insight and comparison site Forbes Advisor UK revealed that out of 90 single-trip policies from 33 travel insurers, 78% provided enhanced Covid-19 cover as standard, while 22% failed to provide cancellation cover.

Crowther explained that while supply has currently reduced, demand for travel insurance is now also likely to be lower, which could help “redress the supply and demand balance”. 

This means that in the short term, hardening in the travel insurance market is ”likely to be less pronounced” than other markets.

However, ”once current restrictions are lifted and demand increases, the effect of the hardened market may be felt more keenly”, she warned.

Watershed moment

In a blog published in April, Geraint Jones, senior private clients executive at Broadway Insurance Brokers, said: “I believe that Covid amounts to something of a watershed for travel insurance because more people are arguably alive to the idea of risk.”

He alluded to a survey by travel agents association ABTA in May 2019, which revealed that more than one-third of British tourists did not buy travel insurance.

Jones predicts an upsurge in this line post-pandemic, however. “I would imagine that there are few travellers with the financial means to deal with any unforeseen eventuality,” he said. 

Nel Mooy, head of proposition, travel, at AXA Partners UK and Ireland, said: “As a travel insurance provider, it is our mission to assist customers who fall ill whilst travelling abroad. However, Covid-19 has brought a new level of complexity to what we do.”

She explained that if a customer falls ill, it’s harder to get them home due to fewer flights and evolving restrictions from governments and airlines.

“Covid-19 is at the front of all of our minds and when people are ready to travel again, worries about lost luggage or stolen wallets are going to be replaced with concerns about falling ill and not being able to return home,” she continued. 

Mooy tipped the UK’s introduction of mandatory polymerase chain reaction (PCR) Covid swab testing in April as a further complication, as each country has its own testing regime.

No change to duties 

Brokers, however, won’t be as affected by fluctuations in the travel market, said Crowther. Instead, brokers should be more concerned about overall hard market conditions.

According to Crowther, there was ”a soft market for a long time”, so this is the first time that some brokers have experience of broking in a hard market. To try and mitigate against future errors and omissions insurance claims, based on inexperience, she said brokers will need to dedicate resources to training and supervision.

She explained: ”Despite the challenging circumstances brought to brokers by a hard market, there is no change to the duties owed by a broker to [its] clients. Clients too will be new to a hard market and the more onerous terms that often brings.

”Brokers would be well advised to ensure that clients’ demands, needs and expectations are understood, managed and met. If it is not possible to meet either demands, needs or expectations, that should be explained as soon as possible and alternative insurance options explored. 

”Above all, brokers should consider policy renewals well ahead of expiry, to give sufficient time to secure capacity on appropriate terms.”

Fair value

Meanwhile, Fiona Macrae, head of consumer awareness initiative, at Travel Insurance Explained (TIE) warned that while most travel insurance providers are now offering cover for medical expenses and emergency assistance should a customer contract Covid-19 abroad, only a handful of providers offer more unique cover against related obstacles.

TIE reviewed 62 of the UK’s top travel insurers and found that only 33% offered cover for additional accommodation and new transport expenses should travellers fail a pre-departure Covid test.

Macrae highlighted that if a consumer unknowingly buys a policy that doesn’t include this cover as standard and then tests positive, they could pay a substantial amount for accommodation and repatriation.

She continued: “In our experience, the cover most consumers desire is financial protection against a change in government advice as a result of Covid-19.”

But, based on TIE’s research, Macrae argued that “no provider offers this cover” because this protection is offered elsewhere. 

”For example, if the government advise against travel to a certain destination and the holiday is cancelled, it is generally the responsibility of the tour operator to invite consumers to change their travel dates or offer a refund.

”Therefore, including cancellation cover for changes in government advice due to Covid-19 and charging the consumer for this cover would not be seen as fair value, as financial protection is available elsewhere,” she said. 


In April, the government trialled vaccine passports - also known as ’Covid Status Certificates’ - which acts as proof an individual has tested negative or has been vaccinated against Covid-19. At present, those that have received a vaccine get a dated card and the details are added to a medical record, but this data could be made available digitally. 

Data being readily availiable could help build trust. Mooy added: “As an industry, we need to be honest, transparent and provide clear information about travel policies and the risks involved with going abroad during this time, so customers can make informed decisions.”

But she warned that ”trust in the industry suffers if customers purchase policies that they then cannot claim against”. 

Mooy also believes the pandemic presents an opportunity for brokers and insurers to talk to customers about domestic travel insurance, which is not widely spoken about in the UK, for customers taking staycations.

What is the government’s traffic light system?

  • Red: Those arriving in the UK from ‘red’ classified destinations will need to isolate in a government-regulated hotel for 10 days upon their return and take three Covid-19 tests. 
  • Amber: Travellers will need to quarantine at home for 10 days upon arrival and take three Covid tests. 
  • Green: Travellers will be required to take a pre-departure test as well as a PCR test on or before day two of their UK arrival. They will not need to quarantine or take any additional tests unless they receive a positive test result.

Source: Travel Insurance Explained

Some insurers providing Covid-19 cover are: 

How do governmental guidelines affect insurance?

Holidaysafe’s ongoing survey revealed that 32% of customers remain too nervous to book a holiday abroad due to changing restrictions, while 46% of Brits do not want to travel abroad soon. 

Following this, Holidaysafe has introduced a new ‘Zero Excess for Deposit-Only Claims’ policy extension, offering customers the option to recover their full deposit if Covid-19 impacts travel.

It includes protection against denied boarding if customers test positive for Covid-19 as part of their pre-departure PCR test. If anyone named on the policy contracts Covid-19 within 14 days of their trip starting, they are able to claim for cancellation.

Sarah Page, brand manager at Holidaysafe, said: ”There is also protection should anyone insured fall ill with Covid-19 while on holiday – this is as long as customers have not travelled against Foreign, Commonwealth and Development Office.”