The travel and tourism industry’s gross domestic product reached $8.35tr in 2022 and is expected to hit $9.6tr in 2023. Simon Hoskin, head of travel, accident and health at Gallagher Bassett, assesses what this means for the insurance industry
The travel industry is expected to return to pre-pandemic levels in 2023. After two years of itchy feet, millions of Brits are planning to fly again - regardless of the cost.
The Covid-19 pandemic impacted the travel sector in a way that no one foresaw - and the aftermath continues to be seen. In 2020 and 2021, international and domestic travel ground to a halt, but 2022 saw a sharp return.
Holiday costs have therefore increased and there have been inflationary medical fees and currency fluctuations too. In turn, this means that travel insurance premiums are also on the rise.
Insurance companies are looking at ratings and coverage closer than ever to ensure they are offering comprehensive cover and competitive premiums.
Specific wordings were included in travel insurance policy terms and conditions to provide cover for Covid-19-related claims, however the virus appears to have weakened over time – in part thanks to the vaccine – meaning that common symptoms of Covid are now similar to the flu.
It is now likely that insurers will look to remove this specific cover and instead include a need for evidence from a medical professional if insureds are unable to travel.
We also envisage a drive for Brits to travel further afield this year. In 2022, travel was more Europe-centric due to the ongoing uncertainty of post-Covid travel. Border controls now appear to have softened, meaning that confidence to fly towards North America and the southern hemisphere is returning.
Insurers will need to be very careful with their premiums throughout 2023 as a small change to rates could price them out of the market due to margins being so competitive - especially on the aggregator sites.
A lot of insurers are starting to discuss value-added products, which are provided alongside their policies – this includes delay repay, airport lounge access and concierge services. This will help give insurers a unique selling point to encourage customers to choose their products.
For insurance companies seeking to expand their product lines into travel in 2023, there are four key points that they need to consider:
- The travel insurance sector is going through a hardening market phase due to some insurers leaving the market and customer appetite being high.
- Ensure cover is comprehensive for business travel and families. Consumers have become more aware of what coverage they need post-Covid.
- Keep premiums competitive and excesses low.
- Older consumers are travelling more, so ensure pre-existing medical conditions are included in policies.