Market overview:

Travel insurance has been brought into focus over the last year by a number of natural disasters overseas and terrorist events. Travellers have been affected by first the Asian tsunami and then Hurricanes Katrina/Wilma and the recent terrorist bombings in Bali. The need to have the requisite travel cover should have been reinforced to consumers and insurers have reassessed the risks covered under standard policies. These issues are discussed in this report in relation to the travel insurance industry.

This sector has become highly fragmented as the traditional distribution route of arranging travel insurance via a travel agent or tour operator has been largely replaced by direct writers, retailers and a large number of online suppliers. Getting in front of the customer is now the key as many trips are booked independently via the Internet and opportunities for securing insurance business are closely linked to the changing holiday booking pattern. The distribution 'revolution' within travel insurance is examined together with the growing tendency to 'white label' policies.

Despite the fact that there have been many new entrants into the travel insurance market over the last decade, suppression of premium rates has meant that profitability has been compromised and the sector is no longer so attractive. There are only a finite number of trips abroad taken each year and the advent of the annual multi-trip policy has reduced the number of 'policy' opportunities. The market certainly does not seem to favour underwriters and premiums may have to rise in order to make books profitable.