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When you are planning for a holiday, whether you’re in the early booking stages or are making the final checks against your packing list to make sure you’ve got everything, one thing that consumers often forget to do is to plan for the worst case scenario.
This is where travel insurance comes in.
For the travel insurance industry, the first and largest obstacle to overcome is the fact that travel insurance is not a legal requirement, nor is it something that consumers are told they have to have in order to travel. Travel insurance is purchased at the discretion of the consumer, and so any choice they make to pass over the deals offered by various insurance companies are choices made at their own risk – facing the prospect of huge bills or great losses should something happen on their holiday which they are not covered for.
That’s not to say that purchasing travel insurance is just a yes or no tick box. As with so many other insurance policies, travel insurance is a product which can be selected through a series of different choices and features, with every tick box adding more to the cost of the insurance premium but at the same time lowering the risk that the consumer could end up forking out huge bills in the event of something going wrong.
There are ways of keeping these policies cheap, with comparison sites offering captive consumers a great way of comparing different deals from a variety of providers, based on the demographic of the traveller and their plans while they are on their trip; and with deal sites offering a variety of offers for consumers who choose to band travel insurance together with other policies, or who opt for multi-trip insurance under an annual pass rather than selecting a new policy for every standalone trip. However, for the most part travel insurance is a balancing act whereby it is up to the consumer to balance out how much they pay as an insurance premium, with how much risk they want to take during their trip.
What is involved in the travel insurance industry and how does it work?
Travel insurance is a policy that consumers can take out prior to a trip, which essentially covers them and provides financial support in the event that something goes wrong. For the most part, and as with so many other insurance systems, the amount of support the consumer can expect to get, and the situations under which they will find themselves covered, depends on the insurance level that they take out and the package that they decide to pay for.
The most basic packages are those which include and provide coverage in the case of:
- Cancellation of the holiday
- Lost luggage
- Lost or stolen money
- Medical costs and bills if something happens to a member of the travelling party while abroad
- Lost gadgets
- Repatriation – that is, bringing home a deceased member of the travelling party
- Delays under which you may be able to claim some compensation
Of course, for every item and situation which is included on the list, there are a whole variety of other elements and scenarios which are not covered and which must either be added as extras, or which the consumers must understand are simply not covered – for example so-called ‘Acts of God’ referring to natural disasters under which no one is at fault and so no insurance can be claimed. For these events, there tend to be specific campaigns and charity drives which provide the support needed by travellers.
One of the main sticking points of travel insurance has to do with the aspects of this list which bump and increase the premium payment required by the insurance provider. One major group that are required to pay extra premiums and add extra features to their insurance policy are those travelling for extreme sports or those undertaking what the provider classes as risky activities during their trip. Road and off-road cycle racing, snowboarding, skiing, competitive racing of any kind, and bungee jumping are all activities which are classed as high risk and must be identified on the insurance policy quotation questionnaire if the consumer hopes to add that cover to their policy. This is where many consumers will be tempted to lie on their form and then undertake the activity on the down low – though this is easily done, it is hugely inadvisable primarily because if you lie and say you won’t be doing the activity and then get injured while doing it, your insurance policy will not apply and you will receive no claim or support. In essence, risky holidays cost more, and the consumer has to be prepared to pay the premium to cover themselves.
So, how is it all calculated?
Anytime a consumer fills in a travel insurance form with an insurance provider, they will be asked a wide set of questions regarding their travel and their trip, as well as their existing health and any conditions, and a set of facts about themselves for example their age. Using this information, the provider will then generate a quote for travel insurance based on the average risk tacked onto the traveller in question, in light of their health condition and the type of things they plan to do on their trip.
We have already ascertained that risky holidaymakers cost more – as do older travellers who are more likely to fall ill during the trip. Other indicators that the insurance premium may be higher are recent surgery, an ongoing illness, and the area in which you are travelling to and how safe it is determined to be by the provider.
The consumer is then asked if they would like to pay an excess – and this is where the all important balance comes in. The excess is the amount that the consumer will pay in the event that they have to make a claim. Choosing to promise a low excess payment means that your travel insurance premium will be much higher – and that as a consumer, you assume the risk of something happening during your trip to be quite high. If you select to pay a high excess, you are essentially saying that you’re happy to commit to that payment if something goes wrong because you believe that to be very unlikely – and so by taking this risk, your insurance premium payment will be much lower.
Once you get to the stage, it all comes down to which insurance provider the consumer decides to put their trust into with regards to high service and reliable support.
Top retailers in the travel insurance industry
Before we list the main retailers in the travel insurance industry, one of the major trends to note in the sector is the rise of package deal holidays which are offering a small tick box at the end of their booking process which offers the buyer their holiday complete with travel insurance. In this instance, what the holiday provider is doing is playing on the convenience offered to the consumer, under the assumption that if they click ‘yes’ they will be very unlikely to then compare what they end up paying as an insurance premium with other deals they could have got from direct insurance providers. This convenience is often enough to outweigh the risk of paying a great deal more through the package deal, leaving a huge amount of consumers paying far too much for their travel insurance and essentially giving huge profits to both the insurance companies and the holiday companies.
To find the right package, consumers should be committed to researching the best deals according to different providers, and must always ensure that they read the terms and conditions to ensure that they are getting the coverage that they need and that they expect. For example, in the event of an injury there are tons of policies out there which cover injury to an extent – unless it is related to one of the activities which is listed on the uncovered list, an example being snowboarding which has to be added as an extra feature. It can be very easy to overlook these kinds of details, and so consumers are often encouraged to use sites like MoneySupermarket and GoCompare which are all designed to make insurance policies make sense to the average consumer.
Some of the top names and retailers in the travel insurance industry include:
- The AA
- Allianz Global Assistance
As well as a whole host of retailers, banks and holiday providers which all offer varying degrees of travel insurance, including:
- NatWest, where travel insurance can be included as part of a loyal customer’s benefits package
Trends in the travel insurance industry
Travel insurance refers to the process of a provider looking at your trip and deciding, based on your demographic and what you will be doing, how much of a risk you present. The higher the risk, the more it costs to insure you.
We have already ascertained that older age travellers are subject to higher premiums, and this is where one of the major trends in the travel insurance industry comes into play – the creation of sites, articles and blogs dedicated to providing insurance options for travellers of different demographics. An example of this is the filter which allows consumers to search for travel insurance specifically for the over 65’s category – a sure sign that this is an age group which becomes subject to higher fees. What this provision of dedicated sites and searches for this age group does is make searching for the best deals both convenient and also more honest and truthful – rather than presenting an “as low as £XX” fee and then upping it hugely once the system determines the consumer is over a certain age, the fee starts somewhere a little more realistic and thus saves a great deal of time and pain for the consumer.
This is also true of other travelling demographics, for example backpackers who again can benefit from the huge rise in articles and blogs which explore the best travel insurance policies for those choosing to take the risk of travelling with no clear destination or accommodation in sight. As a travel concept, this is classed as high risk and so can be subject to very high premiums – but through the support of dedicated site filters and comparison sites, backpackers can narrow their search down to the most viable options quickly and easily.
Another trend taking over the travel insurance industry and changing the way that quotes are delivered comes as a response to modernisation and the simple fact that consumers are travelling more – both for pleasure and for business – and so as travel becomes more commonplace, insurance policies are becoming more affordable and more attainable for the average consumer.
Given the fact that travel insurance is not a legal requirement or a compulsory factor in booking a holiday or travelling, the fact remains that there will always be consumer who decide to take the risk and travel without insurance – hoping that nothing happens that will leave them wishing they had coverage to support them financially and logistically in the face of a disaster. With so many modern provisions now available to make travel insurance more viable for the standard consumer – from comparison sites which offer insight into the best policies available, to tailormade policies whereby consumers can add and take away various features and add-ons to create a policy designed for their specific trip – there has never been a better time to travel with the security of suitable insurance. And for those who still aren’t convinced, it is worth checking out the benefits packages of different banking institutions, and assessing the value of adding travel insurance allowance to a wider insurance policy which covers car and home insurance as well – with banded package deals often providing consumers with various savings for housing all their insurance under one provider name.