Travel insurance represents a potentially lucrative opportunity for agents, if they can stay on top of global uncertainties. By Robert Carlsen
On a recent U.S. State Department travel notifications list, 21 countries were under a travel ‘warning’ level, which indicates that travelers should consider very carefully whether they should go to countries at all. Meanwhile, all of Europe was under a travel ‘alert’, which includes short-term events such as an election season (with strikes, demonstrations or disturbances), a health alert or evidence of an elevated risk of terrorist attacks. What all that says, essentially, is that travel insurance is seeing a considerable increase in sales because of global uncertainties.
“There are definitely more high-profile terrorist acts,” says Megan Freeman, executive director of the U.S. Travel Insurance Association (UStiA), a non-profit national association of travel insurance carriers founded in 2004 and based in Rockville, MD. “Generally, any time there are external events that impact travelers, the industry sees an increase in inquiries and sales.”
UStiA reported that Americans spent nearly $2.8 billion on all types of travel protection in 2016, covering 42.6 million people, with more than 32 million plans provided by UStiA members. Consumers purchased them through distribution channels such as travel suppliers, travel agents, travel insurance providers, internet aggregators and brokers. The number of people covered has increased by 23.7 percent from 2014, the last time the association conducted a travel protection market study.
“In considering purchasing travel insurance, a traveler might want to consider the potential out-of-pocket expenses they would have to otherwise cover in the event that something occurs,” says Freedman. “For example, if you had to cut your trip short due to your illness or that of a family member, could you afford the cost of another plane ticket? If you had to be medically evacuated (which can easily cost $50,000 to $100,000) or had to pay medical bills out of pocket, could you afford those costs? Or, if your flight is delayed and you have to book a hotel room for a night, or your luggage is lost and you need to replace essentials, could you cover those costs out of pocket?”
Freedman adds that accidents can happen to anyone while traveling, especially to age groups which may be more active. Extreme weather, natural disasters and airline delays are the types of occurrences UStiA members are familiar with, and these, combined with consumers’ desire to protect their travel investment are driving the increase in plans purchased and people covered.
Regardless of how many new travelers have embraced travel insurance, there are still multiple misconceptions about what coverage is needed and what it will do. UStiA’s 2012-14 survey released in 2015 showed that more than half of respondents (53 percent) assumed they were not covered for trip cancellation, medical attention or lost baggage. However, the 47 percent who assumed they were covered believed they were covered through their personal or group health insurance — insurance benefits provided by their credit card, the airline/cruise line/tour operator, or their homeowners’ insurance.
UStiA says that travelers need to ask themselves three questions: 1) How much can you afford to lose if you have to forfeit all or part of your vacation because of illness, natural disasters and other concerns? 2) What happens if you become ill or injured while traveling? and 3) Will your airline or tour company, etc. refund your money if a sudden illness forces you to cancel at the last minute?
According to two recent Chief Marketing Officer (CMO) Council/Geo Branding Center/AIG Travel surveys, despite our proclivity for global mobility — the overall worldwide economic impact of tourism and travel was more than $7 trillion in 2015 — international travel comes with plenty of misgivings, frustrations and fears. Recent terrorist attacks in places such as Paris and Nice to Wurzburg, Istanbul and Orlando, have put many travelers on edge. Some 22 percent of Americans now say their vacation planning has been influenced in some way by fear of future violent events. And, the frustrations of trip cancellations, prolonged flight delays, long security lines, high travel expenses and unexpected illness can make both domestic and international travel as painful as it is productive and pleasurable.
“While Medicare and many insurance companies may cover overseas medical expenses for illnesses and injuries occurring while traveling, many travelers are unaware of their lack of coverage and can find themselves severely exposed and at considerable risk,” the CMO/AIG reports, adding that 57 percent of the more than 2,100 leisure travel respondents from mainly the U.S. and Europe have never booked travel insurance.
The CMO/AIG states, “When you throw in other issues, such as trip cancellations, theft of possessions and lost luggage, the argument for insurance becomes even more compelling. Indeed, sickness or injury while traveling (37 percent) and flight cancellations (67 percent) are two of the top three concerns of travelers [today].”
Other figures reflect their growing anxiety levels: nearly three quarters (74 percent) expect to add trip cancellation insurance, nearly half (47 percent) will consider political or emergency evacuation policies, and 42 percent are thinking about accidental death benefits coverage.
According to Jeff Rutledge, CEO of AIG Travel, of which Travel Guard, one of the industry’s largest providers in the U.S., is an affiliate, factors that influence the demand for various travel insurance products include the growth in the number of travelers from emerging markets, as well as traveler demographics and patterns, which vary by market. Furthermore, the evolving regulatory environment can shape not only product and/or price, but also how products are sold and distributed.
Different market segments tend to utilize AIG Travel’s benefits for different reasons, Rutledge adds. For example, in the U.S., the principal driver for leisure travelers is the trip cost and the financial risk associated with a cancellation. However, outbound Japanese leisure travelers, for instance, are typically more concerned about accidents or medical coverage and assistance when they are traveling abroad.
“On top of these patterns in the leisure segments, the corporate segment is displaying an ever-increasing emphasis on employers wanting to protect the safety and well-being of employees who travel for business,” he says. “As a result, more emphasis is placed on medical and security services for this sector.”
Following several anti-travel agent stories regarding travel insurance sales in Consumer Reports magazine last year, such as the selling of policies with limited coverage and the limiting of options because of commission priorities, Eben Peck, senior vice president of government and public affairs, addressed in a letter to the publication that insisted that what they wrote was not true.
“Travel insurance plans offered by travel agencies may be customized for a certain traveler or risk profile, but these are comparable to other plans in the marketplace, and offer a full suite of benefits and coverages,” he wrote, adding that the travel agency channel represents over half of all travel insurance distribution. “Most travel industry attorneys recommend that travel agents offer insurance or obtain a signed waiver with every travel sale, as does ASTA.”