Industry Voice: Rethinking the travel health insurance needs of expats and digital nomads

The stereotype of a digital nomad among some of my colleagues in the travel insurance industry is often a freelancer in their 20s, laptop and backpack in hand, hopping from hostel to hostel across South America and Asia, sustained by a gig-economy job. This type of digital nomad was a key demographic fuelling our industry’s development of low-cost, high-volume travel health insurance plans that primarily cover catastrophic injuries. However, as work becomes increasingly digital and populations age, the image of a twentysomething backpacker is becoming less representative.

The policyholder may appear to the underwriter like a tourist, but lives like a resident to a local hospital

More people are embracing the expat lifestyle, and they are reshaping the global mobility landscape. Your twentysomething backpacker is now joined by a growing number of early retirees, empty nesters, and mid-career professionals travelling with and without families. This new wave of expats represents an essential and complex market segment that the travel health insurance industry must serve effectively. They bring higher expectations and more complex medical histories.

As our understanding of an expat or digital nomad evolves, so too do our industry’s approaches to risk, product design, and delivery. Underwriters and brokers need to move beyond “How do we cover a holiday?” to “How do we provide adequate coverage for their lifestyle?”. 

Who are the modern nomads and expats?

Today’s expats and digital nomads are not always Gen Z backpackers. In my experience, most of the clients my brokerage works with are early retirees and empty nesters, typically in their early to mid-50s.

This shift toward an older demographic of digital nomads has significant implications for risk modelling. A younger policyholder might be more comfortable with some degree of uncertainty, since they are less likely to need extensive coverage or worry about not having it. An older policyholder is more attuned to quality of life and the efficiency of how their money is deployed. Older expats from Western nations such as the United States often left their home country due to the high cost of living. They moved to a foreign country to lower their cost of living and stretch their retirement savings.

This migration is not done for a fun gap year; it is an intentional lifestyle choice that involves liquidating assets and renting a primary residence. This growing demographic means providers and brokers need to focus on plans that aren’t designed for your under-30 single backpacker. The young policyholder buys travel medical coverage that covers the bare minimum, nothing comprehensive.

In contrast, your older demographic requires more extensive coverage. They aren’t backpacking; they are living. They are probably not travelling with children, but they are travelling with an extensive medical history. The industry must focus more on products that work for this older demographic, as they are becoming increasingly prevalent. 

This shift toward an older demographic of digital nomads has significant implications for risk modelling. A younger policyholder might be more comfortable with some degree of uncertainty, since they are less likely to need extensive coverage or worry about not having it. An older policyholder is more attuned to quality of life and the efficiency of how their money is deployed. Older expats from Western nations such as the United States often left their home country due to the high cost of living. They moved to a foreign country to lower their cost of living and stretch their retirement savings. 

This migration is not done for a fun gap year; it is an intentional lifestyle choice that involves liquidating assets and renting a primary residence. This growing demographic means providers and brokers need to focus on plans that aren’t designed for your under-30 single backpacker.

The young policyholder buys travel medical coverage that covers the bare minimum, nothing comprehensive.

In contrast, your older demographic requires more extensive coverage. They aren’t backpacking; they are living. They are probably not travelling with children, but they are travelling with an extensive medical history. The industry must focus more on products that work for this older demographic, as they are becoming increasingly prevalent.

The ‘home country’ dilemma

A constant challenge for modern nomads and their travel health insurance brokers is the regulatory grey area between travel and residency. This issue is particularly prevalent for Americans, who face a set of compliance issues that international travel plans are often ill-equipped to handle. 

The main issue is that clients’ needs vary based on the permanence of their move. The short-term nomad, the semi-permanent expat, and the country hopper have wildly different needs. A key factor is their connection to their home country’s healthcare system. For Americans, the question is “Are they keeping their domestic insurance?”

If they are keeping their domestic insurance, their broker may advise them to have only emergency or evacuation coverage for medical treatment back to the US. If they aren’t keeping their domestic health insurance, the broker will need to find a more comprehensive worldwide plan with US coverage. However, eligibility for this type of coverage is hit-or-miss.

Our industry must navigate a landscape where one treatment can cost $500 in a public hospital or $5,000 in a private facility

Navigating these decisions can be difficult because of the many negative variables that can arise. The Affordable Care Act adds a layer of complexity that can catch nomads, expats, and their travel insurance broker off guard. Travellers from some states could face tax penalties if they drop their domestic coverage without a qualifying exemption. It is important to remind customers to speak with a tax pro to understand their current status and where their tax liabilities lie. However, paying to maintain that coverage while abroad is often financially unsustainable. This creates a coverage gap: the client is overinsured in a country they don’t live in and underinsured in the country they do live in.

The definition of ‘home country’ is also rigid in many policies and often caps coverage in the US to incidental visits, sometimes as short as two weeks to six months. If an expat or digital nomad develops a serious condition and wants to seek treatment at home, they may find that their travel policy invalidates coverage once they set foot in the US, while their domestic policy has lapsed. 

This residential ambiguity is an issue insurers are wary of. The policyholder may appear to the underwriter like a tourist, but lives like a resident to a local hospital. For any policy, a residential address must be provided – some place where the state and federal government can send you official documentation. This is usually your home in the US, with some policyholders using a friend’s or family member’s address if needed, but the legal residence determines tax and coverage liability. The opportunity for our industry lies in flexibility. The rigid definitions of ‘home country’ in our policies are becoming a barrier to entry for people who don’t consider one nation their home.

Regional realities in travel health insurance

A one-size-fits-all approach to global travel insurance policies often crumbles when confronted with the healthcare realities of popular regions for expats and digital nomads. Travel health insurance pros know policies are concentrated in specific, lower-cost-of-living regions such as Thailand, the Dominican Republic, Portugal, and Spain. Every country presents unique challenges for insurers. 

In Thailand and other Southeast Asian countries, the challenge is cost containment in their dual-pricing structures. Private hospitals in major cities offer top-notch care but charge higher rates for foreigners. These rates are significantly higher than local costs. Our industry must navigate a landscape where one treatment can cost $500 in a public hospital or $5,000 in a private facility. Policyholders are unlikely to be aware of these disparities and are likely to visit hospitals with better English-speaking staff. This, in turn, drives up claim costs.

In places such as Portugal or Spain, the issue is often more bureaucratic. Quality of care is high, but access for non-residents is confusing. Overburdened public systems lead policyholders to seek treatment from private clinics that may not have direct billing agreements with international insurers. This situation often puts the policyholder into a pay-and-claim cycle that can tie up thousands of dollars of their own money.

In my experience, clients’ access to good healthcare has not been an issue. Clinical outcomes are usually very good. However, we see more hurdles in the payment portion of treatment. Our industry risks losing customers if we don’t try to bridge the gap between treatment success and financial friction. Policies that cause financial gridlock will be failures in our customers’ eyes, even if the treatment provided is ultimately good.

Improving mental health and chronic care access

If expat and digital nomad demographics are ageing, the risk profile will start to shift from covering catastrophic injury to chronic pain management and mental health. However, policy is slow to catch up to this reality.

No travel medical plan provides coverage for chronic conditions. Some policies may cover a sudden and unexpected recurrence of a pre-existing condition, but most will exclude any chronic pain care.

This leaves an ageing expat population in a precarious position. They are effectively self-insuring against their most likely health risks. A 55-year-old living abroad with controlled hypertension is often uninsurable under a standard travel plan or, at the very least, subject to exclusions that don’t cover their primary health issue.

Mental health coverage is in a similar boat. Most travel health insurance plans will also exclude mental health care. Some exceptions will be out there, but the issue is that many mental health conditions would be considered pre-existing conditions and not covered, especially related to travel health insurance plans. Most expats and nomads are happy and have support. There are many online and in-person communities in regions that expats flock to, so a mental health crisis is not the most pressing concern in our industry. However, we do need to address this issue because burnout, depression, and anxiety are possibilities, and right now, policyholders have no safety net.

A hesitation to cover mental health treatments is understandable. Mental health claims are complex and difficult to adjudicate across borders. However, as more people work and live in other countries, the line between travel and life will continue to blur. A travel health insurance plan that ignores mental health will ignore a fundamental aspect of a policyholder’s wellbeing.

Analogue systems in a digital world

One of the biggest points of friction in our industry today is the canyon-sized gap between consumer expectations of seamless digital healthcare and the messy, analogue world of the insurance industry. The modern customer often expects a world of cashless access, instant approvals, and seamless, invisible access in one place, such as an app. 

The reality is usually a frustrating pay-and-claim process, full of PDFs, emails, and phone calls. Technology can close the gap, but we are not there yet. Telemedicine has been a welcome addition for policyholders abroad. It is a positive development that so many providers include a telehealth option in their coverage, even if the rollout can be clunky and limited to minor issues. 

Artificial intelligence (AI) is often touted as a tool for claims adjudication and fraud prevention, but we are a long way from seeing it as a boon to policyholders. AI is speeding up processing, but many providers have rolled out poor AI programs that only frustrate customers and undermine the human empathy needed in many assistance cases. 

An ideal travel health insurance platform would use a digital ID card and offer real-time integration with local payment systems. Imagine a system that could triage someone to the nearest appropriate clinic or to a telemedicine service that can issue valid local prescriptions, even if you cross borders.

Transparency in policy wording

The reality is that many people who use or would use travel health insurance don’t trust many of the products we offer because they are not explained in a consumer-friendly way.

Too many plans require a 20-page policy document to explain why a sudden recurrence of a pre-existing condition may not be covered. The policy is intentionally too complex for consumers to understand, which leads our own clients not to trust us. Our industry sees this firsthand in the growing prevalence of forums and social media groups that serve as hubs for insurance advice, often replacing professional brokers. Consumers trust these forums more because they are people living the lives they live, not a company simply looking at numbers. 

There is a massive erosion of trust stemming from what our customers perceive as a lack of transparency. Expats and digital nomads share horror stories on these forums about their claims being denied because of terms they did not understand. The insurance industry often takes the wrong approach when this happens. They blame the policyholder for a lack of consumer education rather than just simplifying the policy wording. When our customers can’t understand their policy, it is a flaw in our product’s design.

As expats spend longer and longer periods of time abroad, traditional travel insurance will become irrelevant to them

Moving forward

Brokers can do more to push for change in our industry. Individual brokers can fix problems and help push providers to change their policies. My company has personally advocated for change when we have seen an overwhelming need for it. For example, we got one carrier to change its policy to cover tissue transplants (bone marrow) when we stepped in to advocate for it. We have also gotten a travel plan rewritten when a ‘fine print’ exclusion made a woman who was pregnant on the effective date ineligible for all coverage.

Brokers advocating for their clients when coverage is denied is important, but we can’t just be reactive. We must also be proactive. Our industry must analyse both demographic and claims data and build products that reflect the needs of those demographics.

I understand that reform comes at a cost, and that cost will always have the greatest impact on reform. If expats and digital nomads want comprehensive coverage for chronic and mental health conditions, for example, premiums will have to rise. However, I think policyholders will see the value in a more comprehensive plan. 

The travel health insurance industry needs to adapt. We can’t just sell coverage for trips. We need to provide coverage that meets the actual healthcare needs of modern expats and digital nomads.

As expats spend longer and longer periods of time abroad, traditional travel insurance will become irrelevant to them. 

Successful insurers will be those that bridge the gap between a low-cost, low-coverage travel plan and a high-cost, high-coverage comprehensive healthcare plan. Our industry needs more modular, flexible middle-market solutions that reflect the realities of modern ageing and remote work. 

The demand is out there, and it is time for our industry to catch up.