Age – is it really just a number?
According to data compiled by the Association of British Insurers (ABI), the cost and frequency of claims from travellers in their late 70s is lower than that of a traveller in their 60s, casting doubt on the need for the higher premiums charged by some providers
The data from the ABI shows that when people reached their late 70s, they were less likely to make a claim than people under the age of 65, and the cost of each claim was also likely to be smaller. For example, a 61-year-old has a 7.2-per-cent chance of claiming on their travel insurance policy, and analysis has found that this falls to 4.3 per cent for an 81-year-old. The data also showed that people aged between 61 and 65 were twice as likely to make a claim as those aged between 31 and 35; but the average cost of a claim per policy for people aged between 71 and 75 was six-times greater than for travellers aged between 21 and 25. The data also shows that insurers covering travellers aged 91 and over are losing money on their policies, as the average premium for that group was £132, while the average cost of each claim was £191.
James Daley, founder of the Fairer Finance website, which aims to educate consumers about financial services, commented on the findings: “Insurers have got you used to paying more, so they continue ratcheting up premiums even though costs fall. The irony is rarely lost on the newly retired – just as they have the time and money to travel, their insurance premiums go through the roof.” One reason given for the potential falling claims costs are that holidays taken by those in their late 70s tend to be somewhat more sedate than those taken earlier in life. Added to this is the fact that if someone is still travelling in their late 70s and 80s, they are more likely to be generally quite healthy. An ABI spokesman added: “Some older travellers may continue to buy annual policies because of their convenience, but take fewer holidays, resulting in a lower claims frequency and average claim per policy.”
Daley told ITIJ: “There is an opportunity here. Elderly travellers often feel let down by their insurer. If a company can come in and offer more competitive premiums to those in their 70s, and make a virtue of it, I’m sure there is market share and longer term customer loyalty to be won.”
Age UK, a charity dedicated to working with and for older people, provides travel insurance that is underwritten by Ageas. Martin Cairns, public relations spokesman for Age UK, told ITIJ that the ABI data highlights the fact that travel insurers ‘do not always provide value for those in later life’. Addressing the issue of premiums charged, he said: “Our experience [is that] claims impacts premiums, as do the trends and developments we see externally. For example, we have to be mindful that while people are managing several medical conditions, we have seen the total size of claims made affected when things go wrong.” He added: “There is a significant range of other factors that affect premiums too. For example, older people are travelling further afield, for longer and on more adventurous type holidays.” He concluded: “As a product with enhanced value and with a specific approach to the market, we therefore do not aim to be always cheapest, but instead aim to provide what will best meet the needs of our customers at the best possible price we can achieve for them.”
Antony Brown, scheme underwriter for Travel Insurance Facilities, also spoke to ITIJ about the ABI data: “Age is an integral part of pricing all areas of travel insurance, and understanding the claims value and frequency of claims is of vital importance when rating each product. In addition to this, prices have to be set to compete within the overall market, whilst also ensuring a book of business runs profitably. Pricing strategy also involves the consideration that prices increase with age as smoothly as possible, so customers do not incur sudden large changes in price when moving into a new age bracket.”
Look out for a News Analysis in the next issue of ITIJ, which will focus on pricing cover for older travellers.