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Travel Insurance - UK - February 2019

“Travel insurance providers operate in a tough environment, with strong price competition, rising claims costs and uncertainty over Brexit dampening demand for overseas travel. Maintaining profit margins is a priority for many suppliers, but remains challenging.”
– Sarah Hitchcock, Senior Finance Analyst

This report looks at the following areas:

  • Cost isn’t the biggest factor for those who shun travel insurance
  • Packaged account customers need a more overt nudge to declare medical conditions

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Table of contents

  1. Overview

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

          • The market
            • A stable market, with limited opportunity for real income growth
              • Figure 1: Forecast of gross written travel insurance premiums – Fan chart, 2013-23
            • Brexit uncertainty dampening demand for travel
              • Increase in average premiums reflects higher claims costs
                • Regulator challenges industry to improve access for people with pre-existing conditions
                  • Companies and brands
                    • The largest suppliers are AXA and TIF Group
                      • Other key providers
                        • Withdrawal of Cigna creates new business opportunities for old rivals
                          • Product development and innovation ramps up
                            • The consumer
                              • Three fifths of UK adults have taken a trip abroad within the past two years
                                • Figure 2: Proportion of adults who bought insurance for their last trip abroad, November 2018
                              • One in 10 travelled without insurance
                                • Figure 3: Reasons for not having insurance, November 2018
                              • 5% left buying cover more than six months after booking their trip
                                • Figure 4: When bought travel insurance, November 2018
                              • Price comparison sites are hugely influential
                                • Two in five buying travel insurance have a medical condition
                                  • Figure 5: Ease of getting cover for pre-existing medical condition, November 2018
                                • 69% have held their packaged account for six years or more
                                  • Figure 6: Length of time held packaged current account, November 2018
                                • 96% of people who have made recent use of their packaged travel cover “value” having this insurance
                                  • Figure 7: Agreement with statements about the travel cover included in the packaged account, November 2018
                                • 80% of people who’ve been abroad think it’s important to have airline failure cover
                                  • Figure 8: Importance of, and willingness to pay extra for, common policy add-ons, November 2018
                                • What we think
                                • Issues and Insights

                                  • Cost isn’t the biggest factor for those who shun travel insurance
                                    • The facts
                                      • The implications
                                        • Packaged account customers need a more overt nudge to declare medical conditions
                                          • The facts
                                            • The implications
                                            • The Market – What You Need to Know

                                              • A stable market, with limited opportunity for real income growth
                                                • Demand for overseas travel softens as a result of Brexit uncertainty
                                                  • Average multi-trip premium continues to rise
                                                    • Regulator challenges industry to improve access for people with pre-existing conditions
                                                    • Market Size and Forecast

                                                      • Travel insurance market estimated to be worth £780 million
                                                        • Figure 9: Total value of travel insurance policies sold, by gross written premiums, 2013-18
                                                      • Five-year forecast: market will struggle to achieve real growth
                                                        • Figure 10: Forecast of gross written travel insurance premiums – Fan chart, 2013-23
                                                        • Figure 11: Forecast of gross written travel insurance premiums, 2018-23
                                                      • Forecast methodology
                                                      • Market Segmentation

                                                        • Single-trip sales start to see growth, while multi-trip sales remain stable
                                                          • Figure 12: Segmentation of travel insurance market, by policy type – ABI members only, 2013-17
                                                        • Multi-trip sales still account for the majority of sales by ABI members
                                                          • Average multi-trip premium up 8% in 2017
                                                            • Figure 13: Average travel insurance premium, by policy type, 2013-17
                                                        • Market Drivers

                                                          • Average travel claim has grown by 22% in five years…
                                                            • Figure 14: Total volume and value of travel insurance claims incurred, 2013-17
                                                          • …driven by rising medical inflation
                                                            • Figure 15: Volume and value of medical expenses claims incurred on travel insurance policies, 2013-17
                                                          • Medical expenses account for the largest proportion of claims costs
                                                            • Figure 16: Proportional distribution of travel insurance claims costs, by type of claim, 2017
                                                          • A weaker Pound pushes up claims costs and the price of a holiday abroad
                                                            • Fewer people are expected to take a holiday in 2019 compared to 2018
                                                              • Figure 17: Holidays taken in the past 12 months (and destination) and holidays planned to be taken in the next 12 months, November 2018
                                                            • Question mark over future of EHIC scheme post-Brexit
                                                              • Regulator acts to improve access to travel insurance for people with pre-existing conditions
                                                              • Overseas Travel Trends

                                                                • Number of overseas holidays rises again in 2018, but business trips fall
                                                                  • Figure 18: Number of overseas visits by UK residents, by purpose of visit, 2013-18
                                                                • Four in five trips abroad are to European destinations
                                                                  • Figure 19: Number of overseas visits by UK residents, by region of visit, 2013-18
                                                                • Three in five holidays are arranged independently
                                                                  • Only 3% of holidays are for longer durations of 29+ nights
                                                                    • Figure 20: Number of holiday visits abroad by UK residents, by length of stay, 2013-17
                                                                  • Those taking a short break are more likely to risk travelling without insurance
                                                                  • Companies and Brands – What You Need to Know

                                                                    • Largest suppliers
                                                                      • Significant others
                                                                        • One key player exits market
                                                                          • Recent product innovation
                                                                          • Key Players

                                                                            • AXA and TIF Group are the largest travel underwriters in the UK…
                                                                              • Figure 21: Leading travel insurance underwriters and their partners, January 2019
                                                                            • …followed by Direct Line Group and Aviva
                                                                              • Significant others
                                                                                • Smaller players and recent withdrawals
                                                                                • Competitive Strategies and Innovation

                                                                                  • Market manoeuvrings
                                                                                    • Rebranding activity
                                                                                      • Acquisitions, disposals and market exits
                                                                                        • New distribution partnerships
                                                                                          • Product launches
                                                                                            • New products unveiled by Co-op, Admiral and Bought by Many
                                                                                              • Emerald Life launches “ground-breaking” travel insurance
                                                                                                • Generali UK launches bespoke business travel insurance solutions
                                                                                                  • Technology-driven innovation
                                                                                                    • New insurance start-ups use FCA Sandbox to test innovative solutions
                                                                                                      • Revolut launches ‘£1 Pay-per-Day’ geolocation travel insurance
                                                                                                        • Thomas Cook launches mobile first travel insurance brand
                                                                                                          • AXA installs self-service kiosks at UK airports, providing on-demand cover
                                                                                                            • Chubb launches flight delay insurance
                                                                                                            • Advertising and Marketing Activity

                                                                                                              • Only a handful of providers invest in above-the-line advertising to any significant degree…
                                                                                                                • Figure 22: Top 10 travel insurance advertisers (above-the-line, online display and direct mail advertising only), 2016-18
                                                                                                              • ...with the greatest investment coming from Staysure
                                                                                                                • Providers typically take a multichannel approach
                                                                                                                  • Figure 23: Proportional distribution of travel insurance adspend (above-the-line, online display and direct mail only), by media type, 2016-18
                                                                                                                • Nielsen Ad Intel coverage
                                                                                                                • Brand Research

                                                                                                                    • Brand map
                                                                                                                      • Figure 24: Attitudes towards and usage of selected brands, January 2019
                                                                                                                    • Key brand metrics: Post Office leads the way in recommendation
                                                                                                                      • Figure 25: Key metrics for selected brands, January 2019
                                                                                                                    • Brand attitudes: Traditional insurers benefit from a good reputation
                                                                                                                      • Figure 26: Attitudes, by brand, January 2019
                                                                                                                    • Brand personality: Bupa stands out as exclusive
                                                                                                                      • Figure 27: Brand personality – macro image, January 2019
                                                                                                                    • Micro image: Post Office and AA are regarded as reliable and reassuring
                                                                                                                      • Figure 28: Brand personality – micro image, January 2019
                                                                                                                  • The Consumer – What You Need to Know

                                                                                                                    • Three fifths of UK adults have taken a trip abroad within the past two years
                                                                                                                      • One in 10 travelled without insurance
                                                                                                                        • 5% left buying cover more than six months after booking their trip
                                                                                                                          • Two fifths who bought travel insurance had a medical condition
                                                                                                                            • 69% have held their packaged account for six years or more
                                                                                                                              • 80% think it’s important to have airline failure cover
                                                                                                                              • Insurance Cover for Recent Trip Abroad

                                                                                                                                • Large target market for travel insurance
                                                                                                                                  • Figure 29: When last took a holiday or trip abroad, November 2018
                                                                                                                                • Two thirds bought a new policy for their last trip abroad
                                                                                                                                  • Figure 30: Proportion of adults who bought insurance for their last trip abroad, November 2018
                                                                                                                                • One in 10 travel without insurance…
                                                                                                                                  • …typically due to reasons other than cost
                                                                                                                                    • Figure 31: Reasons for not having insurance, November 2018
                                                                                                                                • Experience of Buying Cover

                                                                                                                                  • Only two in five bought insurance at the same time as booking their trip
                                                                                                                                    • Figure 32: When bought travel insurance, November 2018
                                                                                                                                  • Around two thirds used a price comparison site
                                                                                                                                      • Figure 33: Proportion of adults who used a price comparison site to find/buy a travel policy, November 2018
                                                                                                                                    • 40% had a pre-existing medical condition…
                                                                                                                                      • Figure 34: Presence of pre-existing medical condition at time of purchase, November 2018
                                                                                                                                    • …of which, the majority found it easy to get cover
                                                                                                                                      • Figure 35: Ease of getting cover for pre-existing medical condition, November 2018
                                                                                                                                    • Further improvements to access in the pipeline
                                                                                                                                    • Annual Policyholders – Attitudes and Experiences

                                                                                                                                      • 55% of people with annual policy have it included with their current account
                                                                                                                                        • Figure 36: Source of annual travel insurance policy, November 2018
                                                                                                                                      • A significant minority say they don’t pay a fee for their packaged account
                                                                                                                                        • Figure 37: Proportion of packaged policyholders who pay a fee for their account, November 2018
                                                                                                                                      • Packaged accounts help to instil loyalty
                                                                                                                                        • Figure 38: Length of time held packaged current account, November 2018
                                                                                                                                      • 23% of packaged account holders have developed a medical condition since opening the account
                                                                                                                                        • Figure 39: Proportion of packaged account holders who have developed a medical condition since opening the account, November 2018
                                                                                                                                      • Nearly all packaged account customers who’ve been abroad in the last two years value their travel cover…
                                                                                                                                        • …but only 60% say they review their policy at least once a year
                                                                                                                                          • Figure 40: Agreement with statements about the travel cover included in packaged accounts, November 2018
                                                                                                                                      • Importance Given to Policy Add-ons

                                                                                                                                        • 80% believe airline/supplier cover is important but only 33% are willing to pay extra for it
                                                                                                                                          • Figure 41: Importance of, and willingness to pay extra for, common policy add-ons, November 2018
                                                                                                                                        • The under-35s are most willing to pay extra for added cover
                                                                                                                                        • Appendix – Data Sources and Abbreviations

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

                                                                                                                                                • Total market sales forecast – best- and worst-case scenarios
                                                                                                                                                  • Figure 42: Forecast travel insurance gross written premiums – best- and worst-case scenarios, 2018-23
                                                                                                                                                • Forecast methodology

                                                                                                                                                Travel Insurance - UK - February 2019

                                                                                                                                                US $2,552.20 (Excl.Tax)