Boston, MA -- (ReleaseWire) -- 04/24/2014 -- Gross written premiums for travel insurance were valued at GBP724 million in 2012, and an estimated GBP742 million in 2013. Volatile premium growth was recorded during the review period (2008-2012), as demand was strongly influenced by the UK's recessionary economic backdrop limiting demand for overseas travel. The compound annual growth rate (CAGR) registered during the review period was more stable at -0.53%, however.
UK residents made fewer trips abroad during the review period, with discretionary spending on holidays constrained by weak growth in earnings, employment uncertainty and rising travel costs, while businesses reduced budgets for corporate travel. A preference for domestic holidays induced a 12.5 million dip in the number of leisure and business trips abroad during the review period.
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Medical costs represented 56% of travel insurance claims in 2012, and, despite fewer overseas trips being made, costs relating to claims have risen sharply. The average medical claim totaled GBP900 in 2012, 50% higher than in 2004. The reported refusal of the European Health Insurance Card (EHIC) in hospitals in Spain, Greece and Cyprus added to insurers' cost burdens.
The travel insurance category is highly competitive and has become increasingly commoditized, with insurers competing on price to maintain market share. Online distribution - through direct and price-comparison website channels - is well established, and has fostered an increase in the number of low-cost internet-only brands. The underwriting capacity for these products is dominated by the 10 largest insurers in the category.
Stronger UK economic growth from 2014 will spur an improvement in consumer confidence and spending to provide the impetus to growth in demand for travel insurance over the forecast period. Gross written premiums are forecast to grow at a CAGR of 2.20% over 2014-2018, reaching a total of GBP829 million in 2018.
Opportunities exist to deepen penetration in the category. An aging population and trends for a more active retirement are increasing demand for travel insurance policies with no age limits. A parliamentary review in 2013 found that 91% of travel policies available in the UK imposed an upper age limit, and age-related charities have begun lobbying for market changes. Customer education also allows insurers to highlight the shortfalls of the basic cover offered through the EHIC and Civil Aviation Authority compensation schemes.
- Gross written premiums topped GBP720 million in 2012 and 2013
- Economic conditions discouraged overseas travel
- Rising medical costs have increased claims
- Internet sales are a major distribution channel
- Premium growth will be maintained over 2014-2018
- Penetration can be deepened through policy innovation and customer education
Companies Mentioned in this Report: ACE European Group Ltd, Ageas (UK) Ltd, AIG Europe Ltd, Allianz Insurance Plc, Aviva Plc, Axa UK Plc, Chubb Insurance Company of Europe SE, Direct Line Insurance Group Plc, Great Lakes Reinsurance (UK) Plc, Mapfre Asistencia Compania Internacional de Seguros y Reaseguros, SA
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