Travel premiums are on the verge of plummeting, leading to intense competition and industry consolidation, Club Direct is predicting.
Its report also said direct suppliers and high street brands would begin to dominate the sector, taking market share from travel agents and tour operators.
Club Direct managing director Brent Escott said this was the result of the increasing number of travellers taking independent holidays, which were now as popular as package tours.
"This means that the travel agent has less power to try to persuade people to take its travel insurance, while the direct insurers are able to promote their lower prices and higher degree of specialism," Escott said.
The report said competition would force premium prices down so low that many suppliers would be squeezed out of the market, while the companies that had advanced data analysis systems would use them to grow rapidly.
"With upward pressures on claims and downwards ones on premium costs, only the most effective players will be able to compete," Escott said.
"Others will be bought or driven out of business."
Foreign currency movements will mean that travel insurers start paying out more in medical costs – the report said almost 40% of Club Direct's claims over the past nine months have been medical charges paid in US dollars.
The report also predicted that more insurers would develop in-house claims and medical assistance services and that internet sales would increase.
