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Changing Travel Insurance Market | March 26 2002 |
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Travelling is set to become more expensive in the near future if new research from Mintel is to be believed. The latest study on the UK's travel insurance market indicates that premiums will rise by about a third by the year 2006. Mintel's just-released report, 'Travel Insurance', details how the overall travel insurance market is expected to grow in value from £574 million in 2002, reaching £698 million within the next four years. This growth will probably be driven by premium increases. Until very recently, low profit margins, as a result of intense competition had actually kept these down. However, insurers have been under increasing pressure to increase the prices of their premiums. The new research also reveals that rising claims bills, mainly as a result of increasing medical insurance around the globe, have led to a departure of several major insurers in the travel sector. Travel agents, operators and other intermediaries have already absorbed some of this increase in order to remain competitive, thus reducing their own profitability and commissions. In terms of point of purchase, Mintel has found that nearly half (46 percent) of respondents arrange their travel insurance via a travel intermediary; 15 percent through an insurance company or broker; 14 percent through a bank, building society or credit card company; 5 percent through the Post Office; 3 percent via the Internet and 1 percent through a retailer. Mintel suggests that, in volume terms, travel firms are therefore continuing to lose market share to other providers. However, a third (34 percent) of respondents prefer to buy their insurance at the same time as booking their holiday due to convenience. Over a quarter (27 percent) also think it is probably not worth shopping around, pointing to a degree of customer inertia. Looking ahead, Mintel expect the number of overseas holidays taken by Britons to fall 1 percent to 37.3 million for the whole of 2002. This reduction is predicted on grounds of the knock-on effects of 11 September, together with tour operators cutting capacity to maintain holiday prices. At the same time, the proportion of holidays that are inclusive tours should fall to around 52 percent of annual holiday visits abroad, while independent holidays should rise to 48 percent for the year. Sarah Hitchcock of Mintel comments 'Direct insurers, banks and building societies and other alternative distributors will benefit the most from the rising popularity of independently arranged holidays. There is also likely to be a general increase in demand for insurance from those who are still willing to travel. Cancellation or curtailment of flights or other forms of travel is now more of a threat, due to increased security.' She concludes, 'There perhaps will also be greater demand for the few policies that provide cover for the failure of scheduled airlines. On the other hand, tour operators have cut capacity within the package holiday market in 2002 and this will hit travel insurance sales, particularly via the travel trade route.' Simple printable version of this article. Email this article to a friend.
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