Travel insurance changes due to coronavirus will damage trust throughout insurance in the long term
Findings from GlobalData’s 2019 UK Insurance Consumer Survey indicate that trip cancellation is the second most popular reason to claim on a travel insurance policy. Some insurers have looked to protect themselves from a spike in these claims due to the spread of coronavirus. However, it is unlikely they will get off lightly. Travel insurance is going to receive a lack of trust after coronavirus.
Leading insurance providers including LV=, Aviva, AXA, Admiral, Direct Line, and Churchill – who collectively accounted for 23.1% of the UK’s travel insurance market in 2019, according to GlobalData research – have all announced measures to reduce the impact on their businesses of travel disruption caused by coronavirus. Some providers have taken the unprecedented step of temporarily halting travel insurance sales, while others have removed the travel disruption clause from new policies.
GlobalData’s research indicated that trip cancellations accounted for 28.5% of claims made in 2019, so it is clear to see why providers are limiting the extent to which these claims can increase.
However, these actions will do little to comfort consumers looking towards insurance providers to help limit the financial implications they face from potential holiday or trip cancellations. At present, this is not an industry-wide movement, but given how quickly travel advice is changing, more insurers could follow suit as potential losses increase.
GlobalData’s 2019 UK Insurance Consumer Survey indicates that single-trip policies were by far the most popular choice in 2019, with 61% of individuals who purchased cover before their trip opting for this type of policy. With such a high proportion of consumers purchasing single-trip policies, the implications of changes to policy exclusions could have a long-standing impact on those who may need to purchase cover for future travel.
Consumer sentiment will also be negatively impacted in the long term, as financial services organisations have for a long time been held in low regard by customers; moves such as these will only cement this view further. The industry will undoubtedly have to work hard to rebuild consumer confidence or face the prospect of longer-lasting impacts than those attributed to coronavirus.