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Travel Insurance - UK - February 2014

“Rising medical claims costs is one of the main challenges currently facing travel insurers. Although a stronger Pound will help to mitigate the effect of medical inflation, so too would greater awareness and usage of EHICs.”

– Sarah Hitchcock, Senior Analyst – Financial Services

Some questions answered in this report include:

  • How do holiday booking habits affect the take-up of insurance?
  • How important are packaged current accounts to the growth of annual travel
  • insurance?
  • Will the change in the rules impact future sales?
  • How can greater awareness of EHICs reduce the pressure on medical claims costs?

The UK travel insurance market is mature and highly competitive, with sales of standalone policies driven by demand for overseas travel. The past few years have been difficult for those selling foreign holidays, and this has had some negative impact on demand for travel insurance. However, the effects have not been as acute as they might have been, thanks to the growing availability and popularity of packaged current accounts. The latter have fuelled the take-up of annual travel insurance over the past decade or so. Moreover, the packaged account sector continues to see expansion, with the arrival of new providers and products offsetting the withdrawal of Santander in 2013.

The recent improvement in the economic situation also bodes well for the travel insurance sector, since it should lead to increasing numbers of people holidaying and visiting friends and relatives abroad, as well as more overseas business trips. Yet despite a more positive trading outlook, there remain key challenges for underwriters, not least rising cost pressures linked to medical expenses inflation.

Mintel’s report explores all these issues and trends in detail. By drawing on a range of information and trade sources, it examines the size and composition of the market and assesses its prospects for future growth. Mintel’s market analysis is complemented by the results of an independently commissioned consumer survey, which provides insight into product ownership, consumer buying habits and general attitudes towards having travel insurance when visiting foreign shores.

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Table of contents

  1. Introduction

      • Product definitions and report coverage
        • Abbreviations
          • Key sources
          • Executive Summary

              • The market
                • Standard model predicts solid premium growth
                  • Figure 1: Forecast of travel insurance gross written premiums – fan chart, 2008-18
                • Market segmentation
                  • Market factors
                    • Claims costs impact on profitability
                      • Overseas holiday market starts to pick up
                        • Key challenges
                          • The future of packaged accounts
                            • Companies, brands and innovation
                              • Leading providers
                                • Product innovation
                                  • Brand reinforcement
                                    • Distribution channels
                                      • Figure 2: Method of arranging travel insurance (last holiday abroad within past 12 months), November 2013
                                    • A range of companies sell travel insurance
                                      • Figure 3: Type of company providing travel insurance policy (last holiday abroad within past 12 months), November 2013
                                    • The consumer
                                      • Penetration of annual travel cover
                                        • Figure 4: Ownership of annual travel insurance, by policy type and coverage, November 2013
                                      • Recent holiday experience
                                        • Travel insurance coverage
                                          • Figure 5: Proportion of holidaymakers covered by insurance on their last holiday abroad, by region of destination, November 2013
                                        • Buying habits
                                          • Attitudes towards travel insurance products and providers
                                            • Figure 6: Agreement with selected statements about travel insurance, November 2013
                                          • What we think
                                          • Issues in the Market

                                              • How do holiday booking habits affect the take-up of insurance?
                                                • How important are packaged current accounts to the growth of annual travel insurance?
                                                  • Will the change in the rules impact future sales?
                                                    • How can greater awareness of EHICs reduce the pressure on medical claims costs?
                                                    • Trend Application

                                                      • Trend: Let’s Make a Deal
                                                        • Trend: Click and Connect
                                                          • Mintel Futures: Old Gold
                                                          • Market Drivers

                                                            • Key points
                                                              • Consumer confidence starts to pick up, as the economic recovery finally gains momentum
                                                                • Figure 7: GfK Consumer Confidence Barometer – UK, January 2000-January 2014
                                                              • Pound strengthens against the euro and US Dollar
                                                                • Figure 8: Sterling to euro and US Dollar exchange rates (average bid rates), 2006-13
                                                              • Implication for the travel insurance market
                                                                • Problems with EHICs could lead to higher insurance premiums
                                                                  • Significant minority risk travelling abroad without cover
                                                                    • Improving access to cover for the over-65s
                                                                      • New rules governing the sale of packaged accounts
                                                                        • Other regulatory news
                                                                        • Overseas Travel Trends

                                                                          • Key points
                                                                            • Overseas holiday market starts to pick up
                                                                              • Figure 9: Number of overseas visits by UK residents, by purpose of visit, 2004-13
                                                                            • Trips to North America continue to fall, while Europe and other regions start to see growth
                                                                              • Figure 10: Number of overseas visits by UK residents, by region of visit, 2009-13
                                                                            • The rise of independent travel
                                                                              • Around a third of trips abroad are taken between July and September
                                                                                • Sharp drop in the number of short breaks taken over the 2008-12 period
                                                                                  • Figure 11: Number of visits abroad by UK residents (holiday only), by length of stay, 2008-12
                                                                              • Market SWOT Analysis

                                                                                  • Figure 12: The UK travel insurance market – SWOT analysis, 2014
                                                                              • Who’s Innovating?

                                                                                • Key points
                                                                                  • New technology helps to drive innovation in this market
                                                                                    • New partnerships
                                                                                      • Online developments
                                                                                        • Mobile apps and tools – used as policy differentiators
                                                                                          • New policies launched to cater for the over-65s
                                                                                          • Market Size and Forecast

                                                                                            • Key points
                                                                                              • Travel insurance gross premiums grew 5% in 2013
                                                                                                • Figure 13: Estimated value of travel insurance policies sold, by gross written premiums, 2008-13
                                                                                              • Forecast
                                                                                                • Figure 14: Forecast of gross written travel insurance premiums – fan chart, 2008-18
                                                                                                • Figure 15: Forecast of gross written travel insurance premiums, 2008-18
                                                                                              • Forecast methodology
                                                                                                • Fan chart explanation
                                                                                                • Market Segmentation

                                                                                                  • Key points
                                                                                                    • Annual policies account for at least two thirds of total premiums
                                                                                                      • Figure 16: Segmentation of travel insurance market, by policy type – ABI members only, 2008-13
                                                                                                    • Competitive pressures keep average annual premium stable
                                                                                                      • Figure 17: Average travel insurance premium, by policy type, 2008-13
                                                                                                  • Annual Cost of Claims

                                                                                                    • Key points
                                                                                                      • Since reaching a record high in 2010, claims costs have fallen
                                                                                                        • Figure 18: Total volume and value of travel insurance claims incurred, 2008-12
                                                                                                      • Rising medical inflation remains the number one threat to margins
                                                                                                        • Figure 19: Volume and value of medical expenses claims incurred on travel insurance policies, 2008-12
                                                                                                      • Medical expenses account for over half of total claims costs
                                                                                                        • Figure 20: Proportional distribution of travel insurance claim costs, by type of claim, 2012
                                                                                                    • Market Share

                                                                                                      • Key points
                                                                                                        • Market composition
                                                                                                          • Recent M&A and rebranding activity
                                                                                                            • Recent key account changes have affected underwriters’ market shares
                                                                                                              • Figure 21: Selected distributors of travel insurance and their administration partners/underwriters, January 2013
                                                                                                            • AXA retains its market-leading position
                                                                                                              • Figure 22: Leading travel insurance underwriters, by gross written premiums (UK business only), 2010-12
                                                                                                          • Companies and Products

                                                                                                              • AXA Insurance
                                                                                                                • ACE European Group
                                                                                                                  • Ageas UK
                                                                                                                    • Allianz Global Assistance
                                                                                                                      • Aviva
                                                                                                                        • Cigna Insurance Services
                                                                                                                          • Collinson Insurance Group
                                                                                                                            • Direct Line Group
                                                                                                                              • MAPFRE ASSISTANCE
                                                                                                                                • Munich Re
                                                                                                                                  • White Horse Insurance
                                                                                                                                  • Brand Research

                                                                                                                                    • Brand map
                                                                                                                                        • Figure 23: Attitudes towards and usage of brands in the travel insurance sector, November 2013
                                                                                                                                      • Correspondence analysis
                                                                                                                                        • Brand attitudes
                                                                                                                                          • Figure 24: Attitudes, by travel insurance brand, November 2013
                                                                                                                                        • Brand personality
                                                                                                                                          • Figure 25: Travel insurance brand personality – macro image, November 2013
                                                                                                                                          • Figure 26: Travel insurance brand personality – micro image, November 2013
                                                                                                                                        • Brand experience
                                                                                                                                          • Figure 27: Travel insurance brand usage, November 2013
                                                                                                                                          • Figure 28: Satisfaction with various travel insurance brands, November 2013
                                                                                                                                          • Figure 29: Consideration of travel insurance brands, November 2013
                                                                                                                                          • Figure 30: Consumer perceptions of current travel insurance brand performance, November 2013
                                                                                                                                        • Brand index
                                                                                                                                          • Figure 31: Travel insurance brand index, November 2013
                                                                                                                                        • Target group analysis
                                                                                                                                          • Figure 32: Target groups, November 2013
                                                                                                                                          • Figure 33: Travel insurance brand usage, by target groups, November 2013
                                                                                                                                        • Group One – Conformists
                                                                                                                                          • Group Two – Simply the Best
                                                                                                                                            • Group Three – Shelf Stalkers
                                                                                                                                              • Group Four – Habitual Shoppers
                                                                                                                                                • Group Five – Individualists
                                                                                                                                                • Brand Communication and Promotion

                                                                                                                                                  • Key points
                                                                                                                                                    • Travel insurance providers increase their investment in advertising
                                                                                                                                                      • Figure 34: Advertising expenditure on travel insurance, 2009-2013
                                                                                                                                                    • Saga and Staysure spend the most on advertising
                                                                                                                                                      • Figure 35: Top ten travel insurance advertisers, 2009-13
                                                                                                                                                    • TV and direct mail account for the largest proportion of adspend
                                                                                                                                                      • Figure 36: Proportional distribution of travel insurance adspend, by media type, 2009-2013
                                                                                                                                                    • A note on adspend
                                                                                                                                                    • Channels to Market

                                                                                                                                                      • Key points
                                                                                                                                                        • Online leads the way
                                                                                                                                                          • Figure 37: Method of arranging travel insurance (last holiday abroad within past 12 months), November 2013
                                                                                                                                                        • New technology changes buying habits
                                                                                                                                                          • Figure 38: Type of company providing travel insurance policy (last holiday abroad within past 12 months), November 2013
                                                                                                                                                        • Assessing the popularity of price comparison sites
                                                                                                                                                          • Figure 39: Agreement with statements about shopping for travel insurance, November 2013
                                                                                                                                                      • Penetration of Annual Travel Policies

                                                                                                                                                        • Key points
                                                                                                                                                          • Survey background
                                                                                                                                                            • Around two in five adults have an annual travel policy
                                                                                                                                                              • Figure 40: Ownership of annual travel insurance, by policy type and coverage, November 2013
                                                                                                                                                            • The customer profile of annual travel policyholders is fairly broad…
                                                                                                                                                              • …although a few key demographics record significantly higher take-up
                                                                                                                                                              • Insurance Cover Taken Out on Last Holiday Abroad

                                                                                                                                                                • Key points
                                                                                                                                                                  • Roughly four in five adults have taken a holiday in the past year
                                                                                                                                                                    • Figure 41: Holidays taken within the past 12 months – total sample, November 2013
                                                                                                                                                                  • The under-35s are the keenest travellers…
                                                                                                                                                                    • …and half of them travelled abroad on their last trip…
                                                                                                                                                                      • Figure 42: Destination of last holiday taken, by those who have taken a holiday within the past 12 months, November 2013
                                                                                                                                                                    • …of whom, roughly one in seven chose to travel without insurance
                                                                                                                                                                      • Figure 43: Proportion of holidaymakers covered by insurance on their last holiday abroad, by region of destination, November 2013
                                                                                                                                                                    • One in four 16-24-year-olds have travelled abroad without insurance…
                                                                                                                                                                      • …as have one in ten over-65s
                                                                                                                                                                        • People are less likely to have insurance for short breaks…
                                                                                                                                                                          • Figure 44: Proportion of holidaymakers covered by insurance on their last holiday abroad, by length of time away and region, November 2013
                                                                                                                                                                        • …and when they travel independently to Europe
                                                                                                                                                                          • Figure 45: Proportion of holidaymakers covered by insurance on their last holiday abroad, by package or independent holiday, November 2013
                                                                                                                                                                        • The more people spend on a trip, the more likely they are to have cover
                                                                                                                                                                          • Figure 46: Proportion of holidaymakers covered by insurance on their last holiday abroad, by how much spent on holiday, November 2013
                                                                                                                                                                      • Buying Behaviour

                                                                                                                                                                        • Key points
                                                                                                                                                                          • One in nine holidaymakers admit to buying the cheapest insurance policy
                                                                                                                                                                            • Figure 47: Agreement with statements about buying travel insurance and related issues, by total sample and those who have taken a holiday abroad in the past 12 months, November 2013
                                                                                                                                                                          • Just two in five adults who holidayed in Europe in the past year have an EHIC
                                                                                                                                                                            • Figure 48: Agreement with statements about buying travel insurance and related issues, by those whose last holiday was abroad, November 2013
                                                                                                                                                                          • Low claims rejection rate
                                                                                                                                                                            • Figure 49: Agreement with statements about buying travel insurance and related issues, by coverage on last holiday abroad, November 2013
                                                                                                                                                                        • Attitudes toward Travel Insurance

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Only half of all adults think travel insurance is essential
                                                                                                                                                                              • Figure 50: Agreement with statements about travel insurance, by total sample and those who have taken a holiday abroad in the past 12 months, November 2013
                                                                                                                                                                            • More than a fifth think there are too many exclusions
                                                                                                                                                                              • More than two fifths of over-65s think travel insurance is too expensive for their age group
                                                                                                                                                                                • One in four annual policyholders think it’s better to buy a standalone policy rather than a packaged product
                                                                                                                                                                                  • Figure 51: Agreement with statements about travel insurance, by coverage on last holiday abroad, November 2013
                                                                                                                                                                              • Appendix – Market Size and Forecast

                                                                                                                                                                                • Total market forecast – best- and worst-case scenarios
                                                                                                                                                                                  • Figure 52: Forecast of travel insurance gross written premiums – best- and worst-case scenarios, at current prices, 2013-18
                                                                                                                                                                              • Appendix – Brand Research

                                                                                                                                                                                  • Figure 53: Brand usage, November 2013
                                                                                                                                                                                  • Figure 54: Brand commitment, November 2013
                                                                                                                                                                                  • Figure 55: Brand momentum, November 2013
                                                                                                                                                                                  • Figure 56: Brand diversity, November 2013
                                                                                                                                                                                  • Figure 57: Brand satisfaction, November 2013
                                                                                                                                                                                  • Figure 58: Brand attitude, November 2013
                                                                                                                                                                                  • Figure 59: Brand image – macro image, November 2013
                                                                                                                                                                                  • Figure 60: Brand image – micro image, November 2013
                                                                                                                                                                                  • Figure 61: Demographic profile of target groups, November 2013
                                                                                                                                                                                  • Figure 62: Psychographic segmentation, by target groups, November 2013
                                                                                                                                                                                  • Figure 63: Brand usage, by target groups, November 2013
                                                                                                                                                                                • Brand index
                                                                                                                                                                                  • Figure 64: Brand index, November 2013
                                                                                                                                                                              • Appendix – Channels to Market

                                                                                                                                                                                  • Figure 65: Method of arranging travel insurance, by demographics, November 2013
                                                                                                                                                                                  • Figure 66: Type of company providing travel insurance, by demographics, November 2013
                                                                                                                                                                              • Appendix – Penetration of Annual Travel Policies

                                                                                                                                                                                  • Figure 67: Ownership of annual travel insurance, by type of policy, by demographics, November 2013
                                                                                                                                                                              • Appendix – Insurance Cover Taken Out on Last Holiday Abroad

                                                                                                                                                                                  • Figure 68: UK and overseas holidays taken in the past 12 months, by region, by demographics, November 2013
                                                                                                                                                                                  • Figure 69: Last holiday taken, by region and demographics (filtered on those who have taken a holiday in the past 12 months), November 2013
                                                                                                                                                                                  • Figure 70: Proportion of holidaymakers covered by insurance on their last trip abroad, by demographics, November 2013
                                                                                                                                                                              • Appendix – Buying Behaviour

                                                                                                                                                                                  • Figure 71: Agreement with statements about buying travel insurance and related issues (top five behaviours), by demographics, November 2013
                                                                                                                                                                                  • Figure 72: Agreement with statements about buying travel insurance and related issues (next four most common behaviours), by demographics, November 2013
                                                                                                                                                                                  • Figure 73: Agreement with statements about buying travel insurance and related issues (final three behaviours), by demographics, November 2013
                                                                                                                                                                              • Appendix – Attitudes toward Travel Insurance

                                                                                                                                                                                  • Figure 74: Agreement with statements about travel insurance (top five), by demographics, November 2013
                                                                                                                                                                                  • Figure 75: Agreement with statements about travel insurance (next three), by demographics, November 2013

                                                                                                                                                                              Companies Covered

                                                                                                                                                                              • Ageas
                                                                                                                                                                              • Airtours Holidays
                                                                                                                                                                              • Allianz Group
                                                                                                                                                                              • Argos
                                                                                                                                                                              • Asda Group Ltd
                                                                                                                                                                              • Automobile Association (AA)
                                                                                                                                                                              • Aviva Plc
                                                                                                                                                                              • AXA PPP healthcare
                                                                                                                                                                              • AXA UK plc
                                                                                                                                                                              • Barclays Bank plc
                                                                                                                                                                              • Churchill Insurance
                                                                                                                                                                              • Citibank
                                                                                                                                                                              • Citybond Holdings Plc
                                                                                                                                                                              • Columbus Direct
                                                                                                                                                                              • Cresta Holidays Limited
                                                                                                                                                                              • Direct Holidays
                                                                                                                                                                              • Direct Line Group Limited
                                                                                                                                                                              • ERGO Versicherungsgruppe AG
                                                                                                                                                                              • ETI Insurance
                                                                                                                                                                              • Europ Assistance UK
                                                                                                                                                                              • First Choice Holidays & Flights Ltd
                                                                                                                                                                              • FirstAssist Group Limited
                                                                                                                                                                              • Great Lakes Reinsurance
                                                                                                                                                                              • Groupama Insurances
                                                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                              • HSBC Private Bank (UK) Limited
                                                                                                                                                                              • InsureAndGo
                                                                                                                                                                              • Jet2Holidays Ltd
                                                                                                                                                                              • John Lewis Partnership
                                                                                                                                                                              • Kuoni Travel Ltd
                                                                                                                                                                              • Lloyds Banking Group
                                                                                                                                                                              • Lloyds Retail Chemists Ltd
                                                                                                                                                                              • Marks & Spencer
                                                                                                                                                                              • Mondial Assistance (UK) Limited
                                                                                                                                                                              • Munich Re Group
                                                                                                                                                                              • Nationwide Building Society
                                                                                                                                                                              • NatWest
                                                                                                                                                                              • Norwich Union
                                                                                                                                                                              • Post Office Limited
                                                                                                                                                                              • Privilege Insurance
                                                                                                                                                                              • Royal Automobile Club
                                                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                                                              • Saga Services (finance)
                                                                                                                                                                              • Swiftcover
                                                                                                                                                                              • Tesco (UK)
                                                                                                                                                                              • The National Insurance and Guarantee Corporation Limited
                                                                                                                                                                              • Thomas Cook Group PLC
                                                                                                                                                                              • Thomson Holidays
                                                                                                                                                                              • Virgin Holidays
                                                                                                                                                                              • Virgin Money
                                                                                                                                                                              • White Horse Insurance Ireland Ltd

                                                                                                                                                                              Travel Insurance - UK - February 2014

                                                                                                                                                                              £1,995.00 (Excl.Tax)