Club Direct is slashing its annual travel insurance by 20% this week in anticipation of a slowdown in the market.

The direct writer has already held rates static for two years, benefiting from rapid growth of the backpacker holiday insurance.

Managing director Brent Escott thinks the market is now overcrowded and growth is starting to slow.

“Rates are really starting to harden and things are heating up,” he said.

“There will be a turnaround in the next six months. We are expecting sales growth to drop.”

Escott says Club Direct has successfully achieved volume, insuring 130,000 travellers a year, without impairing service. Much of this he attributed to handling claims in-house rather than through a third party.

He adds: “As a result, we have a healthy database of customers and a high retention rate, considering the nature of the product.”

All of the Club Direct travel insurance policies include £10m cover for medical expenses, with full air ambulance support and worldwide medical assistance available 24 hours a day.

Cover includes £3,000 cancellation, £2,000 baggage, £500 money and documents and up to £2m personal liability cover.