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Travel Insurance - UK - February 2018

“The travel insurance industry is driven by intense price competition, as many consumers draw on price comparison websites in order to find the best deal. At the same time, travel insurers are facing increased cost pressures, making it difficult to keep premiums down and maintain comprehensive levels of cover. Insurers can add value by educating consumers as to the benefits of finding balance between the amount of cover required and the price.”

– Sam Marks, Financial Services Analyst

This report examines the following issues:

  • Helping consumers to compare more than just price
  • The weak Pound is pressurising insurers
  • Accessing cover

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • The market is declining…
              • …and tough conditions are expected to continue
                • Figure 1: Forecast of gross written travel insurance premiums – fan chart, 2012-22
              • Annual policies accounted for four fifths of the market in 2016
                • Visits to Europe make up 80% of UK travel
                  • Medical inflation continues to threaten margins
                    • Regulatory developments
                      • Companies and brands
                        • Travel insurance specialists had the highest usage
                          • Revolut introduces geolocation travel insurance
                            • Total above-the-line adspend fell by 13% in 2016/17
                              • The consumer
                                • Over a fifth of consumers hold annual travel insurance as part of a current account package
                                  • Figure 2: Ownership of annual travel insurance, by policy type and regional coverage, November 2017
                                • Single-trip policies were the most popular for recent holidays
                                  • Figure 3: Travel insurance arrangements for last holiday abroad, November 2017
                                • PCWs were used by the majority of people who bought standalone policies
                                  • Figure 4: Usage of price comparison websites during buying process, November 2017
                                • Cover for illness/injury was the most popular reason for buying
                                  • 45% of people bought travel insurance to protect their belongings
                                    • Figure 5: Reasons for arranging travel insurance, November 2017
                                  • Most consumers are willing to share more information to get the best deal
                                    • Figure 6: Willingness to share information with insurance companies, November 2017
                                  • Desire for simpler legal terminology
                                    • Figure 7: Desire for improvements when arranging travel insurance, November 2017
                                  • Price is the most important factor
                                    • UK-based customer services are important
                                      • Figure 8: Most important factors when arranging travel insurance, November 2017
                                    • What we think
                                    • Issues and Insights

                                      • Helping consumers to compare more than just price
                                        • The facts
                                          • The implications
                                            • The weak Pound is pressurising insurers
                                              • The facts
                                                • The implications
                                                  • Accessing cover
                                                    • The facts
                                                      • The implications
                                                      • The Market – What You Need to Know

                                                        • The market is declining
                                                          • Annual policies accounted for four fifths of the market in 2016
                                                            • Annual policies became more expensive than single policies in 2016
                                                              • Holiday and social visits increased but business visits shrank
                                                                • Visits to Europe made up 80% of UK travel
                                                                  • Medical inflation continues to threaten margins
                                                                  • Market Size and Forecast

                                                                    • The market was worth an estimated £653 million in 2017
                                                                        • Figure 9: Estimated value of travel insurance policies sold, by gross written premiums, 2012-17
                                                                      • Forecast
                                                                        • Figure 10: Forecast of gross written travel insurance premiums – fan chart, 2012-22
                                                                        • Figure 11: Forecast of gross written travel insurance premiums, 2017-22
                                                                      • Forecast methodology
                                                                      • Market Segmentation

                                                                        • Annual policies accounted for four fifths of the market in 2016
                                                                          • Figure 12: Segmentation of travel insurance market, by policy type – ABI members only, 2012-16
                                                                        • Annual policies became more expensive than single policies in 2016
                                                                          • Figure 13: Average travel insurance premium, by policy type, 2012-16
                                                                      • Overseas Travel Trends

                                                                        • Holiday and social visits increased but business visits shrank
                                                                          • Figure 14: Number of overseas visits by UK residents, by purpose of visit, 2008-17
                                                                        • Visits to Europe made up 80% of UK travel
                                                                          • Figure 15: Number of overseas visits by UK residents, by region of visit, 2012-17
                                                                        • 4-13 night stays continued to be most popular
                                                                          • Figure 16: Number of visits abroad by UK residents (holiday only), by length of stay, 2012-16
                                                                      • Claims Costs

                                                                        • Claims volume fell but claims value rose in 2016
                                                                          • Figure 17: Total volume and value of travel insurance claims incurred, 2012-16
                                                                        • Medical inflation continues to threaten margins
                                                                          • Figure 18: Volume and value of medical expenses claims incurred on travel insurance policies, 2012-16
                                                                        • Medical expenses accounted for the majority of claims costs
                                                                          • Figure 19: Proportional distribution of travel insurance claim costs, by type of claim, 2016
                                                                      • Market Drivers

                                                                        • Exchange rates increased the price of providing insurance
                                                                          • Profit margins are being squeezed
                                                                            • The ABTA is cracking down on sickness scams
                                                                              • Monarch Airlines collapses
                                                                                • Saga hit by airline failure
                                                                                  • Turbulence for Ryanair
                                                                                  • Regulatory and Legislative Changes

                                                                                    • FCA calls for input
                                                                                      • FOS upheld 19% of complains in 2016/17
                                                                                      • Companies and Brands – What You Need to Know

                                                                                        • Travel insurance specialists had the highest usage
                                                                                          • Revolut introduces geolocation travel insurance
                                                                                            • Total above-the-line adspend fell by 13% in 2016/7
                                                                                              • Television and direct mail were the main channels of advertising
                                                                                              • Market Share

                                                                                                • Travel insurance specialists were the most popular
                                                                                                  • Figure 20: Share of providers for travel insurance by type, November 2017
                                                                                                • 49% of consumers switched provider in the last two years
                                                                                                  • Current account providers play a significant role
                                                                                                    • The ageing population
                                                                                                    • Competitive Strategies

                                                                                                      • Aviva offers free European annual multi-trip policies
                                                                                                        • Zurich bought and sold
                                                                                                          • Thompson becomes TUI
                                                                                                            • TIF Group launches Travel Insurance Explained
                                                                                                              • Avanti bought by Staysure
                                                                                                                • Revolut introduces geolocation travel insurance
                                                                                                                  • TIF Group launched Postcard Travel Insurance
                                                                                                                    • Staysure introduces ‘end supplier failure’ bolt-on
                                                                                                                      • New insurance app aimed at Millennials
                                                                                                                        • TravelSmart update
                                                                                                                        • Advertising and Marketing Activity

                                                                                                                          • Total above-the-line adspend fell by 13% in 2017
                                                                                                                            • Figure 21: Top ten travel insurance advertisers (above-line, online display and direct mail advertising only), 2012/3-2016/17
                                                                                                                          • Television and direct mail were the main channels of advertising
                                                                                                                            • Figure 22: Proportional distribution of travel insurance adspend (above-the line), by media type, year to October 31 2017
                                                                                                                          • Nielsen Ad Intel coverage
                                                                                                                          • Brand Research

                                                                                                                              • What you need to know
                                                                                                                                • The Post Office is seen as the most trusted and differentiated brand
                                                                                                                                  • Figure 23: Attitudes towards and usage of selected brands, November 2017
                                                                                                                                • Key brand metrics
                                                                                                                                  • Figure 24: Key metrics for selected brands, November 2017
                                                                                                                                • Brand attitudes: Co-op rewards loyalty
                                                                                                                                  • Figure 25: Attitudes, by brand, November 2017
                                                                                                                                • Brand personality: Debenhams Personal Finance is most exclusive
                                                                                                                                  • Figure 26: Brand personality – macro image, November 2017
                                                                                                                                • The Post Office is seen as the most competent
                                                                                                                                  • Figure 27: Brand personality – micro image, November 2017
                                                                                                                                • Brand analysis
                                                                                                                                  • The Post Office is seen as the most trusted provider
                                                                                                                                    • MORE TH>N, Debenhams and esure need to address customer experiences
                                                                                                                                      • Co-op Insurance leads in rewarding loyalty
                                                                                                                                        • Thomas Cook is seen as the most fun brand
                                                                                                                                        • The Consumer – What You Need to Know

                                                                                                                                          • Over a fifth of consumers hold annual travel insurance as part of a current account package.
                                                                                                                                            • Packaged current accounts can provide limited cover
                                                                                                                                              • Single-trip policies were the most popular for recent holidays
                                                                                                                                                • PCWs were used by the majority of people who bought standalone policies
                                                                                                                                                  • Cover for illness/injury was the most popular reason for cover
                                                                                                                                                    • Willingness to share information is high across the board
                                                                                                                                                      • Desire for simpler legal terminology
                                                                                                                                                        • UK-based customer services are important
                                                                                                                                                        • Policy Ownership

                                                                                                                                                          • Over a fifth of consumers hold annual travel insurance as part of a current account package
                                                                                                                                                              • Figure 28: Ownership of annual travel insurance, by policy type and regional coverage, November 2017
                                                                                                                                                            • 53% of people do not have annual travel insurance
                                                                                                                                                              • Older Millennials are more likely to have cover through their current accounts
                                                                                                                                                              • Insurance Arranged for Last Holiday Abroad

                                                                                                                                                                • Single-trip policies were the most popular
                                                                                                                                                                  • Figure 29: Travel insurance arrangements for last holiday abroad, November 2017
                                                                                                                                                                • 90% of annual policyholders travelled to Europe
                                                                                                                                                                  • EHICs provide basic cover in Europe
                                                                                                                                                                    • Younger Millennials more willing to travel without cover
                                                                                                                                                                    • Use of Price Comparison Websites

                                                                                                                                                                      • PCWs were used by the majority of people who bought standalone policies
                                                                                                                                                                        • Figure 30: Usage of price comparison websites during buying process, November 2017
                                                                                                                                                                      • Widest use of PCWs amongst Millennials
                                                                                                                                                                        • Figure 31: Usage of price comparison websites during buying process, by generation, November 2017
                                                                                                                                                                      • PCW usage was higher among people who went on beach holidays
                                                                                                                                                                      • Reasons for Purchase

                                                                                                                                                                        • Cover for illness/injury was the most popular reason for cover
                                                                                                                                                                          • Figure 32: Reasons for arranging travel insurance, November 2017
                                                                                                                                                                        • 45% of people bought travel insurance to protect their belongings
                                                                                                                                                                          • Cover for political unrest/terrorism
                                                                                                                                                                          • Willingness to Share Information

                                                                                                                                                                              • Open Banking presents an opportunity
                                                                                                                                                                                • Figure 33: Willingness to share information with insurance companies, November 2017
                                                                                                                                                                              • People aged 65+ are more willing to share information
                                                                                                                                                                              • Desire for Improvements

                                                                                                                                                                                • Desire for simpler legal terminology
                                                                                                                                                                                  • Figure 34: Desire for improvements when arranging travel insurance, November 2017
                                                                                                                                                                                • The hidden cost of the excess
                                                                                                                                                                                  • Most people are happy with the amount of providers
                                                                                                                                                                                    • Desire for fewer exclusions in older demographics
                                                                                                                                                                                    • Most Important Factors

                                                                                                                                                                                      • Price is the most important factor
                                                                                                                                                                                        • Figure 35: Most important factors when arranging travel insurance, November 2017
                                                                                                                                                                                      • Brands can stand out through customer service
                                                                                                                                                                                        • Older travellers are more concerned about price
                                                                                                                                                                                          • Young people engaged more with online and reviews
                                                                                                                                                                                            • Price was less important for cruise holidays
                                                                                                                                                                                              • Level of cover is more important for those taking activity holidays
                                                                                                                                                                                                • UK-based customer service is more important for those going on cruises
                                                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                    • Abbreviations
                                                                                                                                                                                                      • Consumer research methodology
                                                                                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                                                                                          • Figure 36: Forecast for travel insurance gross written premiums – best, central and worst case scenarios, 2017-22
                                                                                                                                                                                                        • Forecast methodology

                                                                                                                                                                                                        Travel Insurance - UK - February 2018

                                                                                                                                                                                                        £1,995.00 (Excl.Tax)