There has been a lot of speculation within the media that travel insurance policies are likely to increase as a result of both the coronavirus outbreak and the end of the looming Brexit transition period.
While there has been no confirmation on the matter from the insurance industry, we have outlined: why premiums could increase, whether it’s worth travelling un-insured and taking the risk, and lastly how those with existing medical conditions could be affected by a change in premium.
Will travel insurance policies increase in price?
Again, while no travel insurance provider has said that travel insurance premiums will increase, it is likely that policies could go up in price due to the financial challenges that the industry has suffered this year.
Therefore, if premiums do increase, it is likely to be a result of two main factors: the dreaded coronavirus pandemic and Brexit (as the transition period ends on December 31st, 2020).
Why might travel insurance premiums increase?
The first reason travel insurance policies could increase is due to Covid-19 causing a greater risk to travel insurance providers.
We’re all aware that, after the Foreign and Commonwealth (FCO) advised UK residents against ‘all but essential travel’, thousands of holidays were cancelled. In fact, it is anticipated that around 400,000 people claimed for lost costs through their travel insurance provider.
This is the highest number of claims the industry has ever seen, almost doubling the number of claims received after the 2010 Icelandic volcanic ash cloud crisis, which was, until now, the highest amount of claims ever submitted to the industry (294,000).
According to the Association of British Insurers, a whopping £275 million was paid out to customers in cancellation claims related to the coronavirus outbreak. This is twice the amount of paid out for cancellation in 2019, 343.5% higher than the £62 million claims settled due to the Icelandic ash cloud, and the most money the insurance industry has ever had to pay out at once.
The fact that insurers were not able to sell policies during this time also heavily impacted the industry as they had not collected premiums and as such, had not built up enough reserves to cover these costs.
So, why might premiums increase? Well, travel insurance companies base their premiums on the level of risk, and since the coronavirus has and will continue to pose a high risk within the industry for some time into the future, premiums will have to be priced accordingly.
For example, there could be a second wave that causes further holidays to be cancelled, and millions of more people that need to make a claim through their travel insurance.
The second reason travel insurance policies may go up in price is due to Brexit. While the UK officially left the EU on January 31st, 2020, the government had/has until December 31st to make necessary negotiations regarding trade and healthcare, in particular, the European Health Insurance Card (EHIC).
The EHIC has provided British citizens with free, or heavily discounted, emergency medical treatment in countries within the European Union (EU) for years. However, as the UK approaches the end of the transition period without a healthcare agreement in place, the future of the EHIC is starting to look uncertain.
As a result, travel insurance providers have started to consider exactly how much medical costs for British holidaymakers who fall ill abroad could be, without any help from the EHIC.
Is travelling without travel insurance worth taking the risk?
Travel insurance isn’t compulsory, which means it’s down to individuals to decide whether they are in a position to take a financial risk with their holiday.
To put things into perspective, the average price of a single-trip policy for a middle-aged individual with no existing health conditions, travelling to Europe for a week is around £7.
Now let’s account for a possible premium increase, say, a 14% increase; a policy may be more around the £8 mark amid the coronavirus and end of the transition period.
According to the Association of British Insurers, in 2019 the average medical claim was around £1,368.
This means that should you need medical attention abroad and your treatment cost £1,368, your insurer would be paying £1,360 (minus any policy excess) to cover your medical bills. And, if you needed to be flown back to the UK early due to your medical condition becoming a serious risk, your insurer would cover that too.
However, if you didn’t have a travel insurance policy, you’d be paying the full amount for your treatment upfront, plus any other expenses yourself – including the air ambulance which starts from around £8,000.
It’s also worth knowing that if the UK is unable to come to a reciprocal agreement with the EU on healthcare, then it is likely that the cost of medical treatment abroad will increase drastically.
This only emphasises that while the cost of travel insurance may increase, it is well worth investing in something that offers protection during your most vulnerable time. The £8 policy doesn’t seem quite so expensive now, does it?
Will people with medical conditions face higher travel insurance premiums?
Many people worry that declaring their medical history will cause their policy to go up in price. And now there’s a further concern among the public that those with medical conditions may be subjected to further premium increases.
Holidaymaker’s accessibility to travel insurance cover should remain the same whether they have a pre-existing medical condition or not. This means that those with medical conditions should not be subject to targeted increases in premium, and will only see policy rises where the cost of insurance has gone up industry-wide.
However, it’s worth knowing that failing to declare a medical condition in fear of paying an extra few pounds is a huge financial risk to take, as you could end up having to foot any medical bills yourself, should your travel insurance provider find out that you didn’t disclose your medical conditions.
For those with more serious or chronic health conditions, we would recommend that you shop around for your travel insurance or go directly to a specialist, as these insurers tend to offer more tailored policies for lower prices.