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When it comes to traveling, there are two types: 1) those that buy travel insurance, show up to the airport 3 hours early, and favor fanny packs 2) others who are comfortable asking people to cut the line at security because their gate closes in five minutes.
In the Age of Covid, there have been far too many of the former for the travel insurance industry to handle. And now that people have gone from rewatching In Bruges on blu-ray 1,000 times during lockdown to going on holiday in the actual Bruges — travel is booming and the number of people filing claims has surged during our still-not pandemic free times. And the industry has been left licking its wounds and pondering its future.
- Zurich Insurance Group’s Cover-More subsidiary told The Wall Street Journal that the lack of available flights has doubled the cost of bringing a customer home following a claim and that the cost of expanding coverage to include Covid-19 (it’s still around, remember) accounts for 30% to 40% of risk costs for travel insurance. Marcos Alvarez, the head of insurance at credit rating agency DBRS Morningstar, told the WSJ that travel insurance will likely be unprofitable for most firms this year.
- The travel insurance industry’s gross written premium climbed 13% to $17.6 billion last year, according to DBRS, which expects it to rise to $60 billion by 2030. That means, presuming airlines and airports sort things out, there are future profits to be had. Alvarez said, for now, travel insurers could hike their rates by 20% to 30% in the short term, so book better now.
Pack It Up: Some insurance firms could simply choose to leave travel to somebody else. Last year, international health insurance group Bupa ended travel insurance at two of its units, citing how Covid had changed the business.