Payouts for medical claims and cancellations in travel insurance are set to reach record-breaking levels – but that could be a “good move in the long-run”, analysts say.
An increasing number of insurers, including “big names” such as Blue Insurance, Allianz, Caster, and Staysure, are reincorporating COVID-19-related repatriation and medical expenses as well as cancellation coverage, despite the associated risk of these claims in the travel insurance market.
But analysts at GlobalData, a data and analytics company, say that in spite of the inevitable surge in claims, the boost in customers’ trust – as well as a number of other factors – could help them to increase their market shares in the longer term.
GlobalData’s 2019 UK Insurance Consumer Survey found that the most common reason for claiming on travel insurance last year was medical claims, with 31% of respondents citing this reason, while cancellations were the second highest at 29%.
Jazmin Chong, Insurance Analyst at GlobalData, said: “These make up a large part of the cost of claims for the travel insurance market, having generally increased over recent years and reached a record high in 2018, costing insurers £399m, although it decreased slightly to £377m in 2019.”
The Association of British Insurers estimates that travel insurers have paid at least £275m in COVID-19-related claims for the first quarter of 2020.
A “revamp” of products to incorporate COVID-19-related repatriation and medical expenses, as well as cancellation covers, is ongoing, after a temporary pause on sales of new travel insurance policies implemented by insurers between April and July 2020.
Chong said: “If more insurers begin to include COVID-19-related medical and cancellation claims as part of their standalone insurance products, the travel insurance claims market could hit record levels.
“However, despite the potential risks associated with higher claims, the integration of these offerings during unprecedented times is a good move by travel insurers to gain customers’ trust and increase their market shares in the longer term.”