In October’s issue of ITIJ, our lead story looked at potential shortfalls in gap year travel insurance cover. This issue, David Kernek looks at a selection of products on offer for this travelling sector, and asks whether insurers are evolving their backpacker policies in line with new traveller trends
A survey by High Fliers Research earlier this year of almost 18,000 third-year students at UK universities concluded that a combination of graduate debt and a rapidly shrinking jobs market was killing off the traditional gap year, with the number of those planning 12 months of travel or voluntary work abroad down to just 12 per cent from a high of 20 per cent in 2001. But is that the entire story? Or are we seeing the gap year being squeezed into three- and six-month gap getaways before or after uni? There is even, suggests Greg Lawson, head of retail at Collinson Insurance, the possibility of a new market of school leavers in the UK who calculate that six months of travel and work abroad would look just as good – if not better – on their CVs as a standard degree of declining value earned at the cost of a £19,000 debt millstone.
The new gap half year
Lawson says there is a trend towards shorter gap breaks, but he continues to see strong potential in this sector: “We still believe the backpacker market is one we can take advantage of.” So much so that Collinson will be putting a new product – Complete Backpacker – on the market in Q1 next year alongside its Columbus Globetrotter policy.
At Bupa International, marketing director Muriel MacCallum says that reports of the death of the post-uni backpacking experience are unfounded: “On the contrary, there is overwhelming evidence that this type of travelling is on the increase, but the needs of customers have changed. They want better health coverage, probably through education and partly through being a bit more adventurous and going to places where the standard of healthcare is lower than it is in their home countries. They want to make sure they’re covered for all eventualities.”
He company is seeing two trends: “We see younger people taking shorter trips – they might not take a full year off before starting their working life, perhaps just three months – and we also see an increase in the silver generation who are travelling more as they remain fit in the years after retirement. We’ve not seen a decline in this type of travel, just a change in its nature.”
“We see younger people taking shorter trips – they might not take a full year off before starting their working life, perhaps just three months”
UK insurance provider Endsleigh reports the same trend. The company’s travel account manager David Wood, says: “Volumes are unchanged; people are still finding the money, but the duration of gap breaks is definitely getting shorter. Five, ten, 15 years ago, the gap year was a full 12 months. Now, we’re seeing people take specialised trips of anything between six weeks to three or six months.”
Levels of flexibility
Last month, Lawson – having reviewed Columbus’s Globetrotter policy – voiced concern about the limited levels of cover provided by many gap trip policies, the rising cost of medical claims, and the number of young travellers relying on inadequate off-the-shelf family policies, and called on the industry to offer cover that reflected the risks backpackers faced. MacCallum at Bupa International agrees that a changing market calls for product reviews and changes. “We’ve gone through a similar review exercise in the last year or so,” she says. “We typically sold two types of product –travel insurance and international private medical insurance. After looking at customer insights and doing further research, we identified a gap between those two. The travel insurance covers you for flight curtailment, lost luggage, lost personal possessions and emergency health problems, while international private medical insurance is typically for expats and other resident foreigners. One of the gaps we identified for longer-term travellers – gap year students, backpackers, people who would typically be travelling from country to country over a longer period of time – is that they might have a need, particularly on the health side, for something that is a little bit more comprehensive than simply emergency health cover.” Thus, in July last year, the company launched Bupa Flex, a dedicated, short-term health insurance product that travellers can have for between three and 11 months.
“It’s more comprehensive than travel insurance,” says MacCallum, “and the price is tailored to the duration of your time abroad. If you’re going travelling for only three months, you pay only for three months, whereas until we introduced [this policy], we only ever sold annual insurance cover even if you needed it only for three months.” Starting with three months’ cover, if a policyholder decides they want to carry on travelling for another month or three months, they can extend their cover up to a maximum of 11 months. “It’s a sort of ‘pay as you travel’,” says MacCallum, who says the policy gives travellers access to some of the benefits they would get from an international private medical insurance policy but for a shorter period of time.
Since it’s a health insurance policy – albeit a beefed up one – it would still be necessary, however, to have separate cover for loss of passports and personal possessions. But while it doesn’t so much fill the gap as offer an add-on, it does remove the ‘no manual work’ exclusion found in many backpacker policies, including the Explorer policy offered by Bupa Health & Wellbeing UK. With Bupa Flex, there are no exclusions of any description on the type of work that can be done while travelling, which for many is essential for funding the backpacking adventure. “That is one of the reasons why we created this product, which is entirely fit for purpose for people who are working abroad. Very often, if you have someone who wants to take a gap year to travel and work abroad, to get a work visa they would need proof that they have suitable private medical insurance,” explained McacCallum.
Cover features in the new Columbus Complete Backpacker policy – underwritten by PTI Insurance – have not been finalised, says Greg Lawson, but areas being looked at include:
- A detailed list of the the types of work overseas that can be covered
- Course fees in the event of cancellation
- Connecting flights
- Imprisonment abroad and international legal cover
- Adequate cover for communications equipment (laptops, iPhones, iPads, etc.)
- Visa replacements
- Seat-bumping – a big problem on small, local airlines
- Emergency translation services
But will improved cover mean higher premiums? “I think there are companies that provide such cover and call them backpacker policies, but there are large numbers that provide a standard product at cheaper, backpacker rates,” says Lawson. “Backpacker products do tend to run fairly well for insurers. The kind of people who take out a backpacker policy are normally under 40 or 35, they’re not prone to illness, they don’t look particularly vulnerable, they’ve done their research on the country, and perhaps they’re a little bit more street-wise than a business visitor. As this category of insurance tends to perform well, it doesn’t necessarily mean that premiums for the customer will increase significantly. What we should be doing is using this additional value in policies to drive traffic. Based on our performance, we certainly believe we can improve cover without significantly increasing prices.”
One area in which Lawson believes there’s no room at all for flexibility is the exclusion for manual work during gap year travels. “If you have a list of jobs people can do – catering, bar and nightclub work, fruit picking, working in offices, farming that’s non-manual – they know straight away that these are the types of things they can do, and that they’re definitely not covered for other things such as working with machinery. At the end of the day, there’s a difference between an employment insurance and a holiday or backpacker insurance. If someone wants to work to earn some cash, that’s different to them taking a gap year and working untrained in high-risk situations where the employer should have liability insurance and travellers should have the appropriate level of medical cover.”
New cover options
InsureandGo brand manager Elizabeth Brooks agrees that the gap and backpacking breaks are lines of business the industry needs to review, "but no more than any other area of coverage. We regularly review all of our policies; cover tends to evolve with the requirements of our customers.” She says InsureandGo’s backpacker policies cover more than 50 adventure activities as standard, and the company will give a quote for something that isn’t on the list. “We encourage customers to check with us before they start work,” says Ms Brooks, however. “The job will often be covered as standard, but sometimes there will be an extra premium to pay. It is rare, but sometimes we will not able to offer cover if the job is too risky.” One area the company is looking at, however, is cover for flight connections: “We would like to provide cover for this as an add-on, so that it does not increase the price of a policy for everyone else. We provide a pre-travel advice line to all our customers, so if they have any questions about visas we can help them at that stage. They can also make enquiries while they are away, too, but if they are in breach of the terms of their visa, we cannot help them financially.” Cover offered by the company includes legal expenses, and it is also looking to include a section that would allow a loved one to fly out to a policyholder who has been imprisoned. Premiums increase, says Brooks, when new sections are added to policies, so the company’s preference is to look at the option of including new cover as non-compulsory add-ons.
Endsleigh, a leading and long-established player in the UK’s student market – it was started by the National Union of Students (NUS) in 1965 – majors in gap year and backpacking business and sells many of its policies through niche travel agents such as Smaller Earth, Gap 360 and Bunac, which specialise in overseas volunteer, study, work and adventure trips. David Wood says its policies already include the cover options being looked at by Columbus. "We see gap activities as a core element of what we do. We offer a gap year policy and a backpacker one, which have similar types of cover, except that the gap policy is slightly more comprehensive. We try to review our products on an annual basis, if not more frequently, and we get feedback from our direct customers and our agency partners to find out exactly what people want to have covered. Most of our volume is from student policies, so we've taken a great deal of steer from the NUS and travel organisations to find out what young travellers want.”
Wood feels that the best way to offer these services is to let the customer pick and choose what they want covered, which is why Endsleigh offers two versions of the backpacker policy – a basic and a comprehensive – and two versions of the gap year policy. And there are three derivatives of the gap year policy – a volunteer policy, a specific work policy which is set up for people on a work placement or who perhaps just want to go on a work programme in Australia, and an adventure policy. The policies have common elements, but someone going to Canada, where they might want to ski, will not need exactly the same cover as someone who is heading for a working trip across Australia.
Backpacker products do tend to run fairly well for insurers”
"The traveller can choose what they want, and what they want to pay for,” says Wood, “Hiking is a good example. On the standard policy, you can hike up to 11,500ft. If you want to hike up to 19,000ft – that’s potentially Kilimanjaro or Everest base camp – you would need to take on one of our activity extensions. Our standard policy will cover a digital camera or an iPod - something of that value - and if you wanted to cover a MacBook, that's something you could add on to the policy and pay an additional premium for it." Endsleigh does not exclude light manual work or work on ranches but, like Columbus, it draws the line at using machinery, citing low – if any – standards of equipment maintenance in parts of the world and the absence of training provision that is seen as essential in Western countries.
Elsewhere in the world, Southern Cross in New Zealand has three policies that could be used by gappers that provide coverage along similar lines to those products seen in the UK, with the odd notable exception. Its Working Overseas policy is for New Zealand citizens or residents aged 18 to 80 who will be overseas for a month or longer and planning to work during their travels. Office work is automatically included, and there is an option to pay a surcharge for some types of manual work, but hazardous jobs and professional and contact sports are always excluded. Cover includes 24-hour emergency assistance, medical costs and evacuation to New Zealand. The company’s Visiting New Zealand policy covers ‘most types of work’ except heavy manual or hazardous jobs, and professional sport. Key benefits include hospital costs and medical evacuation to home countries. For New Zealanders and Australians who want a gap break without work, Southern Cross's range of TravelCare policies excludes work of any kind, whether paid of voluntary. Policy benefits include medical and evacuation costs arising from terrorism. However, the company’s travel policies exclude ‘remote area’ touring unless it is with a licensed and approved tour operator, and there is no cover for events arising from the traveller's unlawful activity. Maximum cover for a single specified item is NZD10,000 (around GB£5,000 or US$8,000).
Overall, it’s clear that some of the key insurers catering to the backpacker market are responding imaginatively to a changing gap break sector – a sector that is now best illustrated by the shorter duration of pre- and post-uni getaways and the digital kit that’s a must-have in the 21st century backpack. What, however, does not seem likely to change very much is the understandable reluctance of insurers to strike out all of the exclusions on manual work, especially those on labour that entails messing with machinery. The kids will just have to settle for fruit picking and tour guiding. When it comes to the cost of premiums and how these will be affected by enhanced cover options, however, in many cases remains to be seen.