Table of Contents
Overview
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- Key issues covered in this Report
- COVID-19: Market context
- Impact of the January lockdown and the vaccination rollout
- Economic and other assumptions
- Products covered in this Report
Executive Summary
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- Impact of COVID-19 on travel insurance
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- Figure 1: Short-, medium- and long-term impact of COVID-19 on travel insurance, February 2020
- The market
- Value of travel insurance market expected to have fallen by 51% in 2020
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- Figure 2: Forecast of gross written travel insurance premiums, 2015-25
- Single-trip segment grew strongly in 2019
- Cancellations accounted for 38% of the total value of claims in 2019
- Recovery of overseas holiday market not expected until 2025
- EHIC replaced by GHIC as part of Brexit deal
- COVID-19: FCA introduces temporary guidelines to support customers
- Companies and brands
- Heavy losses will squeeze margins…
- …with focus likely to shift from price to quality
- A chance for specialists to stand out from the crowd
- Opportunities and partnerships to be found with new players
- Industry and individual providers will face greater scrutiny
- Advertising will be key in the recovery period
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- Figure 3: Total above-the line, online display and direct mail advertising expenditure on travel insurance, 2016-20
- The consumer
- Confidence mimics lockdown dynamics
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- Figure 4: Actual and planned holiday booking activity, January 2016-January 2021
- Appetite for future trips remains high and domestic trips could be key for growth
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- Figure 5: Travel activity, December 2020
- Many people could be un- or underinsured in a future trip
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- Figure 6: Likelihood of buying travel insurance for next trip, December 2020
- Timing will be key for cover against cancellations
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- Figure 7: Preferred timing to arrange travel insurance, December 2020
- 9% went on their last trip without insurance
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- Figure 8: Insurance cover for last trip abroad, December 2020
- Majority would opt for single-trip policies amid uncertainty
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- Figure 9: Preferred type of policy for next trip, December 2020
- Cover for COVID-related risks is more important than price
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- Figure 10: Important features when buying travel insurance, December 2020
- Convenience and accessibility can be key for last-minute trips
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- Figure 11: Perceptions of type of insurance providers, December 2020
Issues and Insights
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- COVID-19 is an acid test of the travel insurance market
- Single-trip policies could become more popular as travel starts to recover
- An opportunity to rethink the role of travel insurance for domestic trips
The Market – Key Takeaways
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- COVID-19 shrinks travel insurance market by half
- Single-trip segment set to grow as people take fewer trips
- Cancellations will account for a much higher share of claims
- Recovery of overseas holiday market not expected until 2025
- FCA guidelines to support consumers during pandemic puts pressure on margins
Market Size and Forecast
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- COVID-19 derails the travel insurance market
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- Figure 12: Short-, medium- and long-term impact of COVID-19 on travel insurance, February 2020
- Value of travel insurance market expected to have fallen by 51% in 2020
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- Figure 13: Total value of travel insurance policies sold, by gross written premium, 2015-20
- Market expected to remain below pre-COVID-19 levels
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- Figure 14: Forecast of gross written travel insurance premiums, 2015-25
- Figure 15: Forecast of gross written travel insurance premiums, 2020-25
- Market drivers and assumptions
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- Figure 16: Key drivers affecting Mintel’s forecasts (prepared on 25 November 2020), 2015-25
- Learnings from the last recession
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- Figure 17: Travel insurance gross written premiums, 2006-11
- Forecast methodology
Market Segmentation
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- Single-trip segment grew strongly in 2019
- Multi-trip segment accounted for majority of the market in 2019
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- Figure 18: Segmentation of travel insurance market, by policy type, ABI members only, 2015-19
- Average premiums grew in 2019
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- Figure 19: Average travel insurance premium, by policy type, ABI members only, 2010-19
- Average premiums and claims vary greatly by age
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- Figure 20: Average travel insurance premium, by age, 2019
- Figure 21: Average travel insurance premium, average claim value and claims frequency, by age, 2018
Claims Costs Incurred
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- Volume and value of claims fell in 2019…
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- Figure 22: Total volume and value of travel insurance claims incurred (ABI members only), 2015-19
- …reflecting fall in medical expenses claims
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- Figure 23: Volume and value of medical expenses claims incurred on travel insurance policies (ABI members only), 2015-19
- Medical expenses accounted for more than half of claim costs in 2019
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- Figure 24: Proportional distribution of travel insurance claims costs, by type of claim, 2019
Market Drivers
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- COVID-19 grinds overseas travel to a halt…
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- Figure 25: Main visit and spending estimates for UK residents’ visits abroad, April-June 2020
- …with recovery not expected until 2025
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- Figure 26: UK residents’ visit estimates abroad by region and reason for visit, April-June 2020
- Growth in number of trips abroad had slowed down pre-COVID-19
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- Figure 27: Number of overseas visits by UK residents, by purpose of visit, 2015-19
- Choice of destination will be highly linked to distance and restrictions
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- Figure 28: Number of overseas visits by UK residents, by region of visit, 2015-19
- COVID-19 is likely to reverse trends on duration of stay abroad
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- Figure 29: Overseas visits by UK residents, by length of stay, 2009-19
Regulatory Environment
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- EHIC replaced by GHIC as part of Brexit deal…
- …with further agreements under discussion
- COVID-19: FCA introduces temporary guidelines to support customers
Companies and Brands – Key Takeaways
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- Heavy losses will squeeze margins…
- …with focus likely to shift from price to quality
- A chance for specialists to stand out from the crowd
- Opportunities and partnerships to be found with new players
- Industry and individual providers will face greater scrutiny
- Advertising will be key in the recovery period
Competitive Strategies
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- Heavy losses will continue in the near future
- Insurers pledge to treat customers fairly…
- …but the industry and individual providers will face greater scrutiny
- Industry’s initial reaction involved pulling products from the market
- Competition will increase in some sectors of the market…
- …with new opportunities for specialists
- Future pricing: no longer a race to the bottom?
- Competition and partnership opportunities will come from new players
- Cost-saving innovations and an accelerated shift to digital customer service
- COVID-19 exposes a market that is slow to change and adapt
- How brands are responding: tifgroup case study
Advertising and Marketing Activity
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- Advertising in the recovery period
- ATL adspend falls sharply in 2020
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- Figure 30: Total above-the line, online display and direct mail advertising expenditure on travel insurance, 2016-20
- Top six spenders account for 91% of ATL adspend
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- Figure 31: Top six travel insurance advertisers (above-the-line, online display and direct mail advertising only), 2018-20
- Press and direct mail are the preferred channels for advertising
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- Figure 32: Total above-the line, online display and direct mail advertising expenditure on travel insurance, by media type, 2018-20
- Nielsen Ad Intel coverage
The Consumer – Key Takeaways
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- COVID-19 upheaval will create new opportunities for last-minute travel insurance
- Appetite for future trips remains high and UK-only trips could be key for growth
- Majority would opt for single-trip policies amid uncertainty
- Cover for COVID-related risks is more important than price
- Last-minute trips could boost sales for travel companies and retailers
Impact of COVID-19 on Consumer Behaviour
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- Holiday booking plans remains well below pre-pandemic levels
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- Figure 33: Actual and planned holiday booking activity, January 2016-January 2021
- Consumers will want to make the most of future holidays
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- Figure 34: Impact of COVID-19 on household expenditure on holidays, 4-12 February 2021
- Overall consumer confidence mimics virus trajectory and lockdown restrictions
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- Figure 35: The Financial Confidence Index, January 2016-January 2021
Travel Activity and Intentions
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- Appetite for future trips remains high
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- Figure 36: Future travel intentions, December 2020
- A quarter of people expect to stick to the UK…
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- Figure 37: Travel activity, December 2020
- …increasing to 37% of young couples with children
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- Figure 38: Travel Insurance – CHAID – Tree output, December 2020
Future Travel Insurance Intentions
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- Many people could be un- or underinsured in a future trip
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- Figure 39: Likelihood of buying travel insurance for next trip, December 2020
- Opportunity for UK-focused policies
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- Figure 40: Likelihood of buying travel insurance for next trip, by destination of future trips, December 2020
- Timing will be key for cover against cancellations
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- Figure 41: Preferred timing to arrange travel insurance, December 2020
Past and Future Policy Preferences
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- 9% went on their last trip without insurance
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- Figure 42: Insurance cover for last trip abroad, December 2020
- 21% already had cover in place
- Majority would opt for single-trip policies
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- Figure 43: Preferred type of policy for next trip, December 2020
- But most people are likely to stick to their existing preferences
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- Figure 44: Preferred type of policy for next trip, by type of policy used for last trip, December 2020
Important Factors when Buying Travel Insurance
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- Cover for COVID-related risks is more important than price…
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- Figure 45: Important features when buying travel insurance, December 2020
- …but the market will remain very competitive in the recovery period
- Flexibility will resonate with consumers
- COVID-related cover and basic factors are enough to attract 90%
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- Figure 46: Important features when buying travel insurance – TURF Analysis, December 2020
Perceptions of Different Types of Travel Insurance Provider
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- Traditional insurers are seen as reliable
- Specialists are perceived as expert and reassuring
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- Figure 47: Perceptions of type of insurance providers, December 2020
- Convenience and accessibility can be key for last-minute trips
- Current account providers could attract the unconvinced
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- CHAID analysis methodology
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- Figure 48: Travel Insurance – CHAID – Table output, December 2020
- TURF analysis methodology
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- Figure 49: Important features when buying travel insurance, TURF Analysis, December 2020
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