Briefing: Industry has taken its eye off the travel insurance ball

By Kelly Ogley

This article comes to you hot off the beaches of Lake Annecy in France. So, I’m going to talk about an old favourite in the insurance industry – travel insurance.

According to price comparison website Go.Compare, the median premium for travel insurance is less than the cost of a swimsuit at just £20 for a single trip.

However, ABI data shows that the average claim on a travel insurance policy in 2022 came to almost £1,000, with one of the most significant payouts for an emergency amounting to £250,000. That’s great value in anyone’s book.

It’s concerning that many people still choose to travel without insurance – an article I read last year suggested that a startling 12 million people were in this position.

Some people don’t think they need a policy for a short trip. Others think insurance is too expensive.

What’s even more surprising is that a significant number of Brits do think these policies are worthwhile and affordable – they just forget to buy them.

This tells me that the insurance industry is taking its eye off the ball.

This is a market worth almost £500m, a market that’s growing. But that doesn’t mean we can lie back on the sun lounger, sipping another cocktail and saying job done.

We need to explain to more people why sunscreen isn’t the only holiday cover you need. After all, no one wants to see their dream holiday turn into a nightmare of medical bills, lost luggage and cancelled flights.

Customer confusion

We also need to do better by our existing consumers.

Putting the customer first goes to the heart of the FCA’s Consumer Duty, which launched across financial services in July 2023.

Yet a July 2024 Financial Ombudsman Service (FOS) report found an increasing number of holidaymakers aren’t getting their insurance needs met. We’re talking a 19% increase in complaints compared to the previous year. Barring the Covid-19 anomaly, that’s the highest level of complaints in a decade.

So, what should we be doing?

FOS data certainly reveals some confusion, or lack of understanding about precisely what travel insurance policies include and what needs to be disclosed for cover to be valid.

One of the key concerns is previous undisclosed medical conditions. Are people deliberately holding this information back? Not in my experience. The fact is that perceptions of what is classed as a ‘previous medical condition’ tend to vary.

We find that people with heart conditions or those currently undergoing medical treatment are keen to disclose and understand their cover. But it might not occur to other holidaymakers to mention an asthma flair up, or the diabetes that’s now a forgotten fact of life.

And it’s not only medical conditions that are misunderstood. Take winter sports, such as skiing. Would most consumers know that a lot of winter sports cover excludes going off-piste?

Then there’s the issue of flights. Many in the industry will recall last August’s bank holiday chaos where planes were grounded and thousands of sun seekers were stranded.

These hopeful jetsetters wasted many hours trying to contact their airline and insurer. But – whether it’s related to a global IT outage, cyber attack, strike or people shortage – flight cancellations are inevitable.

As an industry, we have to be much more upfront with people about what’s included or excluded from their travel policy, what’s the airline’s duty and what is a customer’s own responsibility.

The right support

The issues we face with travel insurance are the opposite of those faced by cyber. In the latter, people don’t know enough. In the former, I worry consumers think they know too much.

Consequently, holidaymakers purchase cover without advice, rely upon something that’s part of an existing package, take out cover so late that they fail to read the small print, or they simply don’t take any insurance out at all.

Our job as experts is to turn these unwary travellers into seasoned tour guides – ensuring they act early, ask for advice, always read the label.

Travel insurance might be the veteran on the industry block, but we mustn’t take holidaymakers for a ride.

By doing better by our customers, I suspect we could see the uptake of travel policies going stratospheric – meaning a win-win and pina coladas all round.