The future of travel insurance

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ITIJ 224, September 2019
The Chartered Insurance Institute’s Dr Matthew Connell hops into his TARDIS and takes us on a trip to the future – of insurance
 
We have looked up to the sky and wondered what was up amongst the stars for millennia. Fifty years ago marked the start of space exploration, in a way never thought possible before, putting people on the moon whilst probes are sent to planets millions of miles away. Now, as we look at the developing projects of Virgin Galactic, Blue Origin and even SpaceX, it’s no longer just in the realm of imagination that a fully-fledged space tourism sector could be created, and that it could potentially become a reality before we mark the centenary anniversary of the Apollo 11 mission.
The opportunities for this kind of travel are enormous, but so are the risks, meaning new specialist services would need to be developed. Aside from the health and life insurance products you expect from exotic, adrenaline fuelled trips, travel insurance could potentially form the bedrock, safeguarding this new sector, although in a completely different format for extraterrestrial journeys.
 

Beam me up Branson

The current projects Blue Origin and Virgin Galactic are planning theoretically include an offer to arrange personal accident insurance for their passengers via the established market, but participants will potentially have to pay the premiums themselves. Under the scheme, they may not even be classed as a ‘passenger’ in the legal sense, having signed away any liability, and instead deemed a ‘participant’ in the flight. However, there are still some rather substantial question marks around whether such waivers would insulate operators in the event of loss, as the families of any lost participant would not have signed the waiver, and thus could theoretically still sue the operator.
Much like the early days of Concorde and its perceived ‘champagne status’, space travel – at least in the formative years – would be an obvious playground for the rich, which therefore brings a very different set of risks. With business tycoons, billionaires and moguls, for example, all clamouring for a return ticket through the stratosphere, insurance and financial planning could be a rather substantial part of any decision about a first-class trip to Jupiter.
Issues to be considered ahead of taking a leap into the unknown may include impacts on business protection cover and private estate insurance in terms of inheritance tax. This would undoubtedly lead to the creation of specialist personal lines products, delivered by brokers with a detailed knowledge of the sector and the potential risks faced by this new client sector. 
space travel – at least in the formative years – would be an obvious playground for the rich, which therefore brings a very different set of risks

That’s no moon – that’s a potential liability

Other liabilities may also find their ways into personal protection plans in the early days – for example, the rescue costs of a pod landing in the ocean and diverted shipping needing to collect stranded passengers, although these should be covered under the company’s own insurance, which also makes way for a whole new avenue of corporate insurance in space.
As space travel technology improves, the market and consumer appetite will grow, and, as a result, more providers will emerge with differing competitive solutions. To keep pace with this, there will need to be a complete rethink in terms of the type of protection on offer with very different exclusion clauses. Earlier policies may suffer from high premiums and extensive terms and conditions, but much like travel insurance’s growth in access, a similar process of industrialised underwriting may be needed to keep up with demand as less affluent people are given the opportunity to fly amongst the stars.
 
Earlier policies may suffer from high premiums and extensive terms and conditions
 
Our fascination with space has pervaded our culture and our species since the earliest days of our history on this planet. To think we are on the precipice of commercial exploration is as historic as that first moon landing and will herald a new dawn for humanity, but also for those of us in financial services. The risks are enormous and, in some cases, unquantifiable, but the rewards are huge – and not just for tourism, but in terms of potentially normalising the idea of colonising other planets. 
New products and services and specialist brokers are all outcomes you can expect from the creation of such a bold new market, and it will be fascinating to see what steps we take to explore our final frontier.
Dr Matthew Connell
Dr Matthew Connell is Director of Policy and Public Relations at the Chartered Insurance Institute, where his focus is to build public trust in insurance through dialogue with consumers, policymakers, influencers and industry professionals. Previously, he was Head of Regulatory Developments for Zurich Insurance Group’s UK life business. He has worked in banking and insurance for more than 20 years. He holds a PhD in Policy Studies from the University of Warwick.