UK sector offers growth potential
Timetric’s latest report focuses on the UK travel insurance and assistance industry
Gross written premiums for travel insurance were valued at £724 million in 2012, and an estimated £742 million in 2013, according to the report, Travel Insurance in the UK, key trends and opportunities to 2018. Volatile premium growth was recorded during the review period (2008-2012), as demand was strongly influenced by the UK’s recessionary economic backdrop limiting demand for overseas travel. The compound annual growth rate (CAGR) registered during the review period was more stable at -0.53 per cent, however.
UK residents made fewer trips abroad during the review period, with discretionary spending on holidays constrained by weak growth in earnings, employment uncertainty and rising travel costs, while businesses reduced budgets for corporate travel. A preference for domestic holidays induced a 12.5 million dip in the number of leisure and business trips abroad during the review period.
Medical costs represented 56 per cent of travel insurance claims in 2012, and, despite fewer overseas trips being made, costs relating to claims have risen sharply, according to Timetric’s analysis. The average medical claim totalled £900 in 2012, 50-per-cent higher than in 2004. The reported refusal of the European Health Insurance Card (EHIC) in hospitals in Spain, Greece and Cyprus added to insurers’ cost burdens.
Timetric pointed out: “The travel insurance category is highly competitive and has become increasingly commoditised, with insurers competing on price to maintain market share. Online distribution – through direct and price comparison website channels – is well established, and has fostered an increase in the number of low-cost internet-only brands. The underwriting capacity for these products is dominated by the 10 largest insurers in the category.”
Looking to the future, the report forecasts stronger UK economic growth from 2014, which, it states, will spur an improvement in consumer confidence and spending to provide the impetus to growth in demand for travel insurance over the forecast period. Gross written premiums are forecast to grow at a CAGR of 2.20 per cent over 2014-2018, reaching a total of £829 million in 2018.
The report went on to highlight that opportunities do exist to deepen penetration in the category. For example, an aging population and trends for a more active retirement are increasing demand for travel insurance policies with no age limits, while at the same time a parliamentary review in 2013 found that 91 per cent of travel policies available in the UK imposed an upper age limit, and age-related charities have begun lobbying for market changes. Customer education also allows insurers to highlight the shortfalls of the basic cover offered through the EHIC and Civil Aviation Authority compensation schemes, which should encourage more people into buying insurance for their holiday.