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Travel Insurance - UK - February 2017

OVERVIEW
What you need to know
Product definitions and Report coverage
EXECUTIVE SUMMARY
The market
Looking ahead: steady market growth predicted
Figure 1: Forecast of gross written travel insurance premiums – Fan chart, 2011-21
Annual policies account for the largest proportion of volume sales
Trends in the holiday market directly influence sales of travel insurance
Continuing upward pressure on claims costs
Regulatory developments
Companies and brands
Top five underwriters controlled 64% of the market in 2015
Figure 2: Market shares of the top five travel insurance underwriters, by premium income, 2015
There are numerous distributors of travel insurance
The consumer
39% of UK adult internet users have an annual travel policy
Figure 3: Ownership of annual travel insurance, by policy type and regional coverage, November 2013 and November 2016
82% value the travel insurance element of their current account…
…although 42% have had to buy additional cover in the past
Figure 4: Agreement with statements regarding annual travel policy included with current account, November 2016
12% of holidaymakers went abroad uninsured last year
Figure 5: Travel insurance arrangements for last holiday abroad, November 2016
67% of people used a price comparison site when they bought their last travel policy
Figure 6: Usage of price comparison sites during buying process, by type of policy, November 2016
Travel insurance is sold by a wide range of companies
Figure 7: Type of company bought travel policy from, November 2016
Reasonable level of interest in supplier failure cover
Figure 8: Types of cover likely to be interested in when taking next overseas holiday, November 2016
Consumers are not always honest about their health when buying travel insurance
Figure 9: Agreement with statements about pre-existing medical conditions, November 2016
What we think
ISSUES AND INSIGHTS
Scope to expand cover for holiday disruption
The facts
The implications
Non-disclosure of pre-existing medical conditions is a significant problem
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Market growth is likely to be adversely affected by Brexit
Annual policies account for the largest proportion of volume sales
More people taking multiple trips drive growth in the holiday market
Claims costs continue to rise
MARKET SIZE AND FORECAST
The market was worth an estimated £730 million in 2016
Figure 10: Estimated value of travel insurance policies sold, by gross written premiums, 2011-16
Forecast
Figure 11: Forecast of gross written travel insurance premiums – Fan chart, 2011-21
Figure 12: Forecast of gross written travel insurance premiums, 2016-21
Forecast methodology
MARKET SEGMENTATION
There were over 12 million sales of annual travel policies in 2015
Figure 13: Segmentation of travel insurance market, by policy type – ABI members only, 2011-15
Annual policies tend to be more cost-effective for consumers – providing they make use of them
Figure 14: Average travel insurance premium, by policy type, 2011-15
OVERSEAS TRAVEL TRENDS
Number of overseas holidays rises again in 2016…
…but this is unlikely to be repeated in 2017
Figure 15: Number of overseas visits by UK residents, by purpose of visit, 2008-16
80% of trips abroad are to European destinations
Figure 16: Number of overseas visits by UK residents, by region of visit, 2012-16
60% of holidays are arranged independently
Peak holiday period is July to September
Most holidays abroad are between four and 13 nights’ duration
Figure 17: Number of visits abroad by UK residents (holiday only), by length of stay, 2012-15
CLAIMS COSTS AND IMPACT OF BREXIT
Volume of claims may have fallen, but the claims ratio has risen
Figure 18: Total volume and value of travel insurance claims incurred, 2011-15
Medical inflation remains the number one threat to margins
Figure 19: Volume and value of medical expenses claims incurred on travel insurance policies, 2011-15
Medical expenses account for the largest proportion of claims costs
Figure 20: Proportional distribution of travel insurance claim costs, by type of claim, 2015
Brexit impact
A weaker Pound will push up claims costs and the price of a holiday abroad
Figure 21: Sterling to euro and US Dollar exchange rates (average annual and monthly rates), 2011-16
Future of EHICs in doubt
REGULATORY AND LEGISLATIVE ENVIRONMENT
New packaged account rules have improved standards…
…with progress made in regards to checking eligibility for travel insurance
Most miss-selling complaints are not upheld
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Top five underwriters held almost two thirds of the market in 2015
There are numerous distributors of travel insurance
Limited above-the-line advertising activity
Insurance brands suffer from low trust levels and customer loyalty
MARKET SHARE
AXA is the largest travel underwriter in the UK
Figure 22: Leading travel insurance underwriters, by gross written premiums (UK business only), 2013-15
Significant others
COMPETITIVE STRATEGIES
Corporate activity
Recent M&A and rebranding activity
Distribution partnerships
Figure 23: Selected distributors of travel insurance and their administration partners/underwriters, January 2017
New product launches and industry innovation
Emerald Life launches travel cover for LGBT community
Columbus Direct installs self-service insurance kiosks in airports
Thomas Cook offers policyholders a GP app
New terrorism protection add-on – Safe Journey
ADVERTISING AND MARKETING ACTIVITY
Expenditure on above-the-line advertising accounts for a tiny proportion of total premium income
Figure 24: Top ten travel insurance advertisers (above-the line, online display and direct mail advertising only), 2012-16
One provider accounted for half of all adspend in the latest year
TV and direct mail represent the largest share of adspend
Figure 25: Proportional distribution of travel insurance adspend (above-the line, online display and direct mail only), by media type, 2012-16
Nielsen Ad Intel coverage
BRAND RESEARCH
What you need to know
Brand map
Figure 26: Attitudes towards and usage of selected brands, December 2016
Key brand metrics
Figure 27: Key metrics for selected brands, December 2016
Brand attitudes: Insureandgo offers “good value”
Figure 28: Attitudes, by brand, December 2016
Brand personality: Churchill and Virgin Money are among those who have the fun factor
Figure 29: Brand personality – Macro image, December 2016
Aviva and the AA are the most “reliable” brands
Figure 30: Brand personality – Micro image, December 2016
Brand analysis
Columbus Direct and InsureandGo need to raise brand awareness
Protectyourbubble.com and Virgin Money are fun and vibrant brands
Zurich stands alone in exclusivity
Aviva and the AA are the most competent and reliable
THE CONSUMER – WHAT YOU NEED TO KNOW
39% of UK adult internet users have an annual travel policy
Most customers value the cover they get with their packaged account
In the past year, 12% of holidaymakers went abroad uninsured
Most use a price comparison site and buy online
Many consumers want supplier failure cover
Significant minority of adults choose not to disclose a health condition
OWNERSHIP OF ANNUAL TRAVEL INSURANCE
Two in five adults have an annual travel policy
Figure 31: Ownership of annual travel insurance, by policy type and regional coverage, November 2013 and November 2016
Men are more likely to have annual cover than women
25-34-year-olds are a key target group for packaged account cover
PACKAGED ACCOUNT POLICYHOLDERS – EXPERIENCES AND ATTITUDES
82% value the travel insurance included in their packaged account…
…but 42% have had to buy additional cover
Figure 32: Agreement with statements regarding annual travel policy included with current account, November 2016
INSURANCE ARRANGED FOR LAST HOLIDAY ABROAD
44% of UK adult internet users went on holiday abroad in the past year
Figure 33: Holidays taken within the past 12 months, November 2016
Over the past year, 12% went on holiday without insurance
Figure 34: Travel insurance arrangements for last holiday abroad, November 2016
CHANNELS USED TO BUY COVER
Price comparison sites play a hugely influential role in this market
Figure 35: Usage of price comparison sites during buying process, by type of policy, November 2016
Numerous distributors create a very competitive marketplace
Figure 36: Type of company bought travel policy from, by type of policy, November 2016
Price comparison websites help to drive direct sales of travel insurance
A significant minority of travel policies are still arranged offline
Figure 37: Method of buying travel policy, by type of policy, November 2016
COVER TYPES INTERESTED IN
Significant consumer interest in supplier failure insurance
Figure 38: Types of cover expected to be most interested in when taking next overseas holiday – Total sample versus those who took an overseas holiday in the past year, November 2016
Many consumers are also keen on having disruption cover
58% of the over-65s are interested in cover aimed at older consumers
Other cover types are more niche
PRE-EXISTING MEDICAL CONDITIONS – EXPERIENCES AND ATTITUDES
35% have some type of pre-existing medical condition
Figure 39: Agreement with statements about pre-existing medical conditions, November 2016
Significant minority have had trouble getting cover for a pre-existing condition
19% of annual policyholders would not inform their insurer if they developed a health condition
Figure 40: Agreement with statement about pre-existing medical conditions – Annual policyholders only, November 2016
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Key sources
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Total market sales forecast – Best- and worst-case scenarios
Figure 41: Forecast travel insurance gross written premiums – Best- and worst-case scenarios, 2016-21
Forecast methodology

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