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Travel Insurance - UK - February 2012

“Although the travel insurance market has performed relatively well, especially considering the wider economy and holiday trends, there is still room for improvement. Competition on price and the high number of policies available has made it more difficult to compare the quality of cover, leaving some consumers with the wrong level of protection. This has resulted in a high level of consumer scepticism regarding claim payouts, and is something that providers will need to address in order to increase future sales.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Has the economy made consumers more willing to travel abroad without travel insurance?
  • Have consumers’ preferences changed when it comes to arranging travel cover?
  • Is the EHIC providing competition to travel insurance and making consumer overlook cover?
  • Can providers make policies more transparent and gain consumer trust?
  • Are travellers downgrading from annual to single-trip policies due to the income squeeze?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Market size and forecast
              • Figure 1: Forecast for total value of travel insurance GWP, 2006-16
            • Channels to market
              • Figure 2: Channels used to purchase travel insurance, 2007-11
            • Market factors
              • Overseas holiday numbers stabilised in 2011
                • Travel firms continue to struggle in 2011
                  • The number of travel insurance claims increased in 2010, and so did the amount paid out
                    • Holidays remain in demand despite a challenging economy
                      • Companies, brands and innovation
                        • AXA was the biggest travel insurance underwriter in 2010
                          • Figure 3: Top five travel insurance underwriters, by GWP, 2010
                        • Brand promotion
                          • Who’s innovating?
                            • The consumer
                              • Travel and holiday trends
                                • Figure 4: Holiday trends, November 2011
                              • Travel insurance ownership
                                • Figure 5: Travel insurance ownership, November 2011
                              • Sources of information
                                • Figure 6: Sources of information, November 2011
                              • Purchasing behaviour
                                • Figure 7: Purchasing trends, November 2011
                              • Attitudes towards travel insurance
                                • Figure 8: Attitudes towards travel insurance, November 2011
                              • What we think
                              • Issues in the Market

                                  • Has the economy made consumers more willing to travel abroad without travel insurance?
                                    • Have consumers’ preferences changed when it comes to arranging travel cover?
                                      • Is the EHIC providing competition to travel insurance and making consumer overlook cover?
                                        • Can providers make policies more transparent and gain consumer trust?
                                          • Are travellers downgrading from annual to single-trip policies due to the income squeeze?
                                          • Future Opportunities

                                            • A friendly travel insurance policy
                                              • Making travel insurance cool and exciting
                                              • Internal Market Environment

                                                • Key points
                                                  • Overseas holidays stop declining in 2011
                                                    • Figure 9: Domestic vs overseas holidays, 2004-11
                                                  • Travellers from the UK are most likely to visit Europe
                                                    • Figure 10: Outbound holiday visits, by region visited, 2004-10
                                                  • Independent holidays remain more popular among travellers
                                                    • Figure 11: Inclusive holidays vs independent holidays, by volume, 2004-10
                                                  • Collapse of numerous travel firms continues in 2011
                                                    • Figure 12: ATOL tour operator failures/closures in the UK, 2011
                                                  • Number and cost of claims increase in 2010
                                                    • Figure 13: Travel insurance claims incurred, by volume and value, 2004-10
                                                  • Complaints about travel insurance on the up…
                                                    • …and should act as a warning to customers to check policy details
                                                      • Over-65s facing big hikes in travel insurance premiums
                                                      • Broader Market Environment

                                                        • Key points
                                                          • Stuttering economic recovery is a challenge for the travel insurance industry
                                                            • Figure 14: GDP quarterly percentage change, Q1 2004-Q3 2011
                                                          • Holidays remain a popular way to spend extra money
                                                            • Figure 15: What people choose to spend any extra money on, December 2011
                                                          • Holidaymakers get less for their money due to weaker Sterling
                                                            • Figure 16: Spot exchange rates, US Dollar and euro into Pounds Sterling, January 2008-November 2011
                                                          • UK’s aging population is a challenge and opportunity for insurers
                                                            • Figure 17: Trends in the age structure of the UK population, 2006-16
                                                          • Growing number of ABs could help to increase travel insurance sales
                                                            • Figure 18: Forecast adult population trends, by socio-economic group, 2006-16
                                                        • Competitive Context

                                                          • Key points
                                                            • EHIC makes some people overlook travel insurance when travelling in Europe
                                                              • Figure 19: Agreement with the statement ‘I have a European Health Insurance Card so do not require travel insurance in Europe’.
                                                          • SWOT Analysis

                                                              • Figure 20: Travel insurance – SWOT analysis, 2012
                                                          • Who’s Innovating?

                                                            • Key points
                                                              • Nationwide’s FlexAccount offers free travel insurance to over-65s
                                                                • M&S Money launches a bespoke travel insurance policy
                                                                  • RIAS offering a ‘kids go free’ policy on travel insurance
                                                                    • Women can now take out specialist cover through Bikini Travel Insurance
                                                                      • Halifax reacts to travel disruptions with new cover
                                                                        • True Traveller launches a flexible travel insurance policy
                                                                        • Market Size and Forecast

                                                                          • Key points
                                                                            • GWP remained stable in 2010 and is expected to grow slightly in 2011
                                                                              • Figure 21: Travel insurance GWP, 2005-11
                                                                            • Annual policies holding up the travel insurance market
                                                                              • Figure 22: Volume and value of single-trip and annual policies, 2005-11
                                                                            • Market forecast
                                                                              • GWP is expected to reach £945 million by 2016
                                                                                • Figure 23: Forecast for total value of travel insurance GWP, 2006-16
                                                                              • Travel insurance policies are expected to grow at a slower rate than GWP
                                                                                • Figure 24: Forecast for total number of travel insurance policies written, 2006-16
                                                                              • Annual travel insurance policies will drive the market…
                                                                                • Figure 25: Forecast for value of annual travel insurance GWP, 2006-16
                                                                                • Figure 26: Forecast for annual travel insurance policies written, 2006-16
                                                                              • …while single-trip cover sales will stabilise
                                                                                • Figure 27: Forecast for value of single-trip travel insurance GWP, 2006-16
                                                                                • Figure 28: Forecast for single-trip travel insurance policies written, 2006-16
                                                                              • Forecast methodology
                                                                              • Market Share

                                                                                • Key points
                                                                                  • AXA continues to be the main travel insurance underwriter
                                                                                    • Figure 29: Top ten travel insurance underwriters, by GWP, 2008-10
                                                                                  • Partnership play a big part in the travel insurance market
                                                                                    • Figure 30: Selected travel insurance brands and underwriters, February 2012
                                                                                • Companies and Products

                                                                                  • AXA
                                                                                    • Aviva
                                                                                      • RBS Group
                                                                                        • Europ Assistance
                                                                                          • Chartis
                                                                                            • Munich Re
                                                                                              • Ageas/Fortis
                                                                                              • Brand Communication and Promotion

                                                                                                • Key points
                                                                                                  • Adspend increases by 11% in the year to October 2011
                                                                                                    • Figure 31: Topline adspend for travel insurance, 2008/09-2010/11
                                                                                                  • Saga remains the number-one advertiser of travel insurance
                                                                                                    • Figure 32: Top ten travel insurance advertisers, 2008/09-2010/11
                                                                                                  • Direct mail accounts for more than 50% of travel insurance adspend
                                                                                                    • Figure 33: Travel insurance adspend, by media type, 2010/11
                                                                                                  • Companies use a seasonal approach when promoting travel insurance
                                                                                                    • Figure 34: Monthly trends in travel insurance adspend, 2010
                                                                                                • Channels to Market

                                                                                                  • Key points
                                                                                                    • Over a third of consumers purchase cover directly from the insurance company
                                                                                                      • Figure 35: Channels used to purchase travel insurance, 2007-11
                                                                                                    • Two fifths of consumers arrange their travel insurance online
                                                                                                      • Figure 36: Methods used to arrange travel insurance, 2007-11
                                                                                                  • Travel and Holiday Trends

                                                                                                    • Key points
                                                                                                      • Internet users are more likely to holiday abroad than in the UK
                                                                                                        • Figure 37: Holiday trends, November 2011
                                                                                                      • Consumers are most likely to go on one overseas holiday
                                                                                                        • Figure 38: Number of holidays taken abroad in the last year, November 2011
                                                                                                      • Income and socio-economic standing has a big impact on type and number of holidays
                                                                                                        • Figure 39: Holiday trends, by socio-economic grouping and gross annual household income, November 2011
                                                                                                        • Figure 40: Number of holidays taken abroad in the last year, by socio-economic grouping and gross annual household income, November 2011
                                                                                                      • 25-34 year-olds and over-55s are most likely to take a holiday
                                                                                                        • Figure 41: Holiday trends, by age, November 2011
                                                                                                    • Travel Insurance Ownership

                                                                                                      • Key points
                                                                                                        • The majority of consumers have travel insurance when going abroad
                                                                                                          • Figure 42: Travel insurance ownership, November 2011
                                                                                                        • Some policy overlap exists in the travel insurance market
                                                                                                          • Figure 43: Travel insurance ownership, by travel insurance ownership, November 2011
                                                                                                        • Single-trip and annual policies appeal to different income groups
                                                                                                          • Figure 44: Travel insurance ownership, by socio-economic group and gross annual household income, November 2011
                                                                                                        • Over-55s prefer annual policies and cover through a current account
                                                                                                          • Figure 45: Travel insurance ownership, by gender and age, November 2011
                                                                                                        • Travel insurance ownership is higher among package holiday travellers
                                                                                                          • Figure 46: Travel insurance ownership, by most popular holiday trends, November 2011
                                                                                                      • Sources of Information

                                                                                                        • Key points
                                                                                                          • Price comparison websites the most popular source of information
                                                                                                            • Figure 47: Sources of information, November 2011
                                                                                                          • The majority of consumers use one source of information
                                                                                                            • Figure 48: Repertoire of sources of information, November 2011
                                                                                                          • Independent holidaymakers more likely to use comparison sites
                                                                                                            • Figure 49: Sources of information, by most popular holiday trends, November 2011
                                                                                                          • Different sources are used for single-trip and annual travel insurance
                                                                                                            • Figure 50: Sources of information, by travel insurance ownership, November 2011
                                                                                                        • Purchasing Behaviour

                                                                                                          • Key points
                                                                                                            • Almost half of consumers purchase cover directly from the insurer
                                                                                                              • Figure 51: Purchasing trends, November 2011
                                                                                                            • Disparity between sources of information and purchasing methods
                                                                                                              • Figure 52: Purchasing trends, by sources of information, November 2011
                                                                                                            • Two thirds of annual policies are purchased from the insurance company
                                                                                                              • Figure 53: Purchasing trends, by travel insurance ownership, November 2011
                                                                                                          • Attitudes Towards Travel Insurance

                                                                                                            • Key points
                                                                                                              • The majority of people appreciate the need for travel cover but some might be buying the wrong policies
                                                                                                                • Figure 54: Attitudes towards travel insurance, November 2011
                                                                                                              • Insurers need to gain consumer trust and simplify policies
                                                                                                                • Older travellers are more risk averse than younger holidaymakers
                                                                                                                  • Figure 55: Agreement with the statements ‘I tend just to go for the cheapest policy’ and ‘It is not wise to go abroad without travel insurance’, by age, November 2011
                                                                                                                • Single-trip policy holders are more likely to go for the cheapest cover
                                                                                                                  • Figure 56: Attitudes towards travel insurance, by travel insurance ownership, November 2011
                                                                                                              • Appendix – Market Size and Forecast

                                                                                                                  • Figure 57: Forecast for total travel insurance GWP, 2006-16
                                                                                                                  • Figure 58: Forecast for travel insurance policies written, 2006-16
                                                                                                                  • Figure 59: Best and worst case forecast for total GWP of travel insurance policies written, 2011-16
                                                                                                                  • Figure 60: Best and worst case forecast for total number of travel insurance policies written, 2011-16
                                                                                                                  • Figure 61: Best and worst case forecast for annual travel insurance GWP, 2011-16
                                                                                                                  • Figure 62: Best and worst case forecast for number of annual travel insurance policies written, 2011-16
                                                                                                                  • Figure 63: Best and worst case forecast for single-trip travel insurance GWP, 2011-16
                                                                                                                  • Figure 64: Best and worst case forecast for number of single-trip policies written, 2011-16
                                                                                                              • Appendix – Travel and Holiday Trends

                                                                                                                  • Figure 65: Most popular holiday trends, by demographics, November 2011
                                                                                                                  • Figure 66: Next most popular holiday trends, by demographics, November 2011
                                                                                                                  • Figure 67: Other holiday trends, by demographics, November 2011
                                                                                                                  • Figure 68: Repertoire of holiday trends, by demographics, November 2011
                                                                                                              • Appendix – Travel Insurance Ownership

                                                                                                                  • Figure 69: Travel insurance ownership, by demographics, November 2011
                                                                                                              • Appendix – Sources of Information

                                                                                                                  • Figure 70: Most popular sources of information, by demographics, November 2011
                                                                                                                  • Figure 71: Next most popular sources of information, by demographics, November 2011
                                                                                                                  • Figure 72: Repertoire of sources of information, by demographics, November 2011
                                                                                                              • Appendix – Purchasing Behaviour

                                                                                                                  • Figure 73: Purchasing trends, by demographics, November 2011
                                                                                                              • Appendix – Attitudes Towards Travel Insurance

                                                                                                                  • Figure 74: Agreement with the statements ‘I tend just to go for the cheapest policy’ and ‘I do not trust insurers to pay out on travel insurance’, by demographics, November 2011
                                                                                                                  • Figure 75: Agreement with the statements ‘It is not wise to go abroad without travel insurance’ and ‘Insurers make it too hard to compare policies’, by demographics, November 2011
                                                                                                                  • Figure 76: Agreement with statements ‘I have an European Health Insurance Card so do not require travel insurance in Europe’, by demographics, November 2011

                                                                                                              Companies Covered

                                                                                                              • Ageas
                                                                                                              • AIG Group (American International Group Inc)
                                                                                                              • Argos
                                                                                                              • AVA
                                                                                                              • Aviva Plc
                                                                                                              • AXA UK plc
                                                                                                              • Barclaycard
                                                                                                              • Chartis UK
                                                                                                              • Churchill Insurance
                                                                                                              • Direct Line Group Limited
                                                                                                              • ETI Insurance
                                                                                                              • Europ Assistance UK
                                                                                                              • First Choice Holidays & Flights Ltd
                                                                                                              • First Trust Bank
                                                                                                              • FirstAssist Group Limited
                                                                                                              • FlyBE
                                                                                                              • Fortis Group SA/NV
                                                                                                              • Grupo Santander Central Hispano S.A.
                                                                                                              • HSBC Private Bank (UK) Limited
                                                                                                              • Lloyds Banking Group
                                                                                                              • Mondial Assistance (UK) Limited
                                                                                                              • Munich Re Group
                                                                                                              • Nationwide Building Society
                                                                                                              • NatWest
                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                              • Swiftcover
                                                                                                              • TUI AG

                                                                                                              Travel Insurance - UK - February 2012

                                                                                                              £1,750.00 (Excl.Tax)