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Travel insurance was a product or upsell that only a minority of vacationers bought in most countries before the pandemic. But many insurers — and the travel brands that resell their high-margin products — are hoping to see travel insurance sales boom once vacationers return to booking trips in large numbers.
So many insurers are racing to make their policies more flexible in an attempt to court the potential demand in a market that could hit $45 billion in six years.
“Insurance has traditionally been way behind with respect to digital innovation and customer experience,” said Jeremy Murchland, president of Seven Corners. “This crisis gave insurers and resellers time to pause and reassess how they’re selling travel insurance and to improve their digital games.”
Exhibit A: When TUI Group recently launched marketing campaigns to woo travelers, the Germany-based tour operator collided with the latest twist in the pandemic, which threatened fresh lockdowns in France and other popular destinations. So TUI put faith in more comprehensive travel insurance policies as a lure for bookings.
All TUI and airtours trips have “Covid Protect” insurance included for trips booked by the end of February 2021 will receive coverage for costs during holidays in connection with Corona, such as a virtual doctor’s visit, Covid test, return flight guarantee ,as well as hotel and treatment costs. TUI offers travel insurance is underwritten by AXA, Europe’s largest provider of travel insurance.
TUI Germany introduced in late January a new “new Flex Tariff” for many of its hotel-only and flight package bookings. For a surcharge, vacationers can buy a cancellation option up to two weeks before departure without the need to give reasons or file paperwork. For a journey for up to about $3,000 (€2,500), TUI’s flex tariff costs about $47 (€39). After that, the price rises up to $480 (€399) for a trip worth more than about $24,000 (€20,000). Agents typically get a commission of around 5 percent for selling this additional service unless the customer cancels a trip, in which case TUI refunds vacationers the surcharge, too.
Travel Insurance Adapts
The move reflects a broader evolution in travel insurance that has had effects rippling through the travel sector. A year ago, most travel insurance policies had exclusions for pandemics. Berkshire Hathaway Travel Protection was a rare exception.
Now, some countries, including Aruba, Brazil, Russia, and Thailand, are requiring that visitors prove they have medical insurance or travel insurance policies.
The insurers have been responding to this demand by creating more flexible policies.
Earlier this week, the Sri Lankan arm of insurance group Fairfirst rolled out less strict travel insurance. Policies will now cover many medical expenses arising from accidents and sicknesses, including treatment for the virus, up to certain thresholds. Some policies will now include ways to recover some unused, pre-paid travel and accommodation costs if a traveler has to cancel a trip because their close relations have contracted the virus. The policies now cover many expenses related to compulsory quarantines, too.
In recent months, France-based travel agency Ulysse began offering a product for European travelers that lets users cancel their trip for any reason without providing documentation. The Paris-based startup Koala creates the policies for Ulysse and other brands.
A Sector Slammed by the Pandemic
Insurers eagerly hope for a boom in sales as a way to recover from 2020, when pandemic-related restrictions on travel sabotaged sales.
For instance, AIG, the largest seller of travel insurance in the U.S., saw a 5 percent drop in the net premiums written internationally, to $9.5 billion, in the first nine months of 2020 compared to the same period a year earlier, ‘due to a lower production due to the impact of Covid-19, most notably in travel,” said the company’s financial statements. A spokesperson declined requests for an interview.
“Insurers will try to make up for lost ground with maybe 25 percent higher rates once a semblance of normality returns,” said Brian O’Connell, an analyst with insuranceQuotes, a consumer comparison service.
Yet as hard as the pandemic has been on travel insurers, the crisis may have catalyzed sales long-term.
“We’ve seen a huge increase in awareness about travel insurance, including awareness about asking the right questions about, ‘Hey: What’s covered?'” said Murchland of Seven Corners. “I wouldn’t be surprised if there’s a greater than 50 percent increase in the number of travelers that actually purchase travel insurance as we come out of this.”
Seven Corners, based in Indiana, recently added and rebranded plans to cover the coronavirus. Several of its plans now reimburse covered medical expenses if a customer contracts the virus on their trip. The benefit is not tied to travel warnings from governments.
“Change hasn’t only been on the benefit side of things,” said Murchland. “It’s really the whole customer experience where insurers have been innovating around right now.”
Seven Corners itself supplemented its call center with text-based chat options, such as through popular messaging app WhatsApp. It also added many self-service options so that customers can now log into their account to make several edits. Customers can pick cancelation options for their policies online without having to talk to an agent.
Travel Suppliers See an Upselling Opportunity
Several travel suppliers also spy an opportunity for upselling customers on insurance as the crisis unfolds.
Two months ago, U.S. airline JetBlue enhanced its travel insurance product and it is currently trying to enhance its marketing technology to encourage more flyers to buy the insurance, provided by Allianz.
U.S. travelers spent about $3.8 billion a year on travel protection coverage before the crisis hit, according to the U.S. Travel Insurance Association.
While travel brand sales of trip policies aren’t new — Expedia Group has resold travel insurance from AIG’s Travelguard unit since 2018, for example — plenty of room for sales growth exists.
Some pressure from hosts may prompt the company to add policy options for guests. A class-action lawsuit recently alleged that the agency’s refund policy in the United States put hosts in awkward situations when travelers wanted to cancel trips. (See: Airbnb Accused in Lawsuit of Ripping Off Hosts and Guests With Covid Refund Policy.)
Airbnb doesn’t cover accommodations travelers booked since March 14, 2020 under its “pandemic special circumstances policy” unless the guest or host has contracted the coronavirus. So hosts must improvise. Some private landlords charge a service fee of half the reservation total as early as two days after a traveler makes a reservation if the vacationer cancels. Yet others still offer a free refund up to one day before departure.
Suppose Airbnb offered guests the option to add travel insurance coverage as a standard feature. Such coverage might ease the pressure on hosts and reduce confusion among some vacationers, some observers said.
Many travel companies expect a boom in bookings from Baby Boomers, or travelers over the age of 60, who will generally be in the first group to receive vaccinations. Travel insurers don’t yet offer special coverage at a reduced cost for the vaccinated, experts said.
Looking ahead to when the pandemic recedes, travel brands see large upselling opportunities in travel insurance, which consumers now understand and appreciate more, experts said.
Travel insurance sales may hit $45 billion by 2027, said a Global Market Insights forecast.
Besides the insurers mentioned above, major players that may benefit include Munich Re, Generali, Tokio Marine, Sompo Japan, CSA Travel Protection, Pingan Baoxian, Mapfre Asistencia, USI Affinity, Hanse Merkur, and MH Ross.