UK Travel Insurance 2009

Table of Contents

OVERVIEW

• Catalyst
• Summary

EXECUTIVE SUMMARY

• The recession has changed consumer attitudes towards travel, resulting in a negative impact on premiums
  • The travel insurance market grew to £763m in 2008
  • Consumers have reduced their number of trips abroad due to a tougher economic climate
  • The level of detected fraud has increased in the UK travel insurance market

• Travel insurance providers spent £3m on advertising in the first half of 2009
  • Marketing and advertising increased to £7.7m in 2008 but fell in the first half of 2009
  • Direct mail continued to be the dominant form of advertising in H1 2009

• The overall number of visits abroad has fallen but consumers have increased their travel to non-European destinations
  • The number of visits abroad fell to 69 million in 2008
  • The number of visits abroad fell by 16.6% from Q1 2008 to Q1 2009

• A decrease in annual policy sales and strong competition will lead to slower growth in GWP
  • Sales of annual policies are forecast to fall in 2009, constraining premium income growth
  • Rates are expected to rise in the market, though strong competition will limit the level of growth achieved

MARKET CONTEXT

• Introduction
• The recession has changed consumer attitudes towards travel, placing an impact on premiums
  • Consumers have reduced their number of trips abroad due to a tougher economic climate
  • Recessionary product innovation and marketing is evident in the travel insurance market
  • Aggregators are driving price competition in the market but have lost their appeal among insurers
  • The level of detected fraud has increased in the UK travel insurance market

• Travel insurance GWP is estimated to have grown in 2008 despite the recession
  • The travel insurance market grew to £763m in 2008
  • The proportion of premium income generated from annual policies grew in 2008
  • Annual travel insurance premium rates fell significantly in 2008, while single trip prices rose
  • The number of travel insurance policies sold increased by 10.6% in 2008

• The market was profitable in 2008, though claims inflation continued to grow claims costs
  • The gross loss ratio in the travel insurance market improved in 2008
  • Claims costs increased despite improving claims frequency
  • The average cost of a travel insurance claim increased significantly in 2008
  • Medical expenses continued to constitute the largest cost to the industry

• The FSA began regulating travel agencies and airlines selling travel insurance alongside bookings
  • Five authorized firms have been created since January 2009
  • The FSA has begun scrutinizing the practice of pre-ticked travel insurance by travel firms and airlines
  • Insurers have voiced concern over the Equality Bill

CUSTOMER FOCUS

• Introduction
• The overall number of visits abroad has fallen but consumers have increased their travel to non-European destinations
  • The number of visits abroad fell to 69 million in 2008
  • The number of visits abroad fell by 16.6% from Q1 2008 to Q1 2009
  • More consumers are visiting Asian, Latin American and African countries
  • Business related travel abroad declined by 1.1% in 2008
  • The number of holidays taken abroad by UK residents only rose by 0.2% in 2008

• Travel insurance providers spent £3m on advertising in the first half of 2009
  • Marketing and advertising increased by 2% to £7.7m in 2008 but fell in the first half of 2009
  • Direct mail continued to be the dominant form of advertising in H1 2009
  • The top 10 travel advertisers collectively spent £2.5m on advertising their products in H1 2009
  • The Post Office significantly increased its advertising spend on travel insurance products in 2008

COMPETITIVE DYNAMICS

• Introduction
• Corporate partnerships remain a key element of travel insurance distribution in 2009
  • AXA secured two travel related partnerships in 2009
  • Mondial Assistance secured a partnership with Expedia.com
  • FirstAssist partnered with Confused.com
  • Liverpool Victoria and the Nationwide Building Society entered a new partnership in 2008

• Product innovation continues to be a key competitive strategy among travel insurance providers
  • Equity has launched travel insurance products tailored to travelers diagnosed with cancer
  • LV= launched a new travel insurance policy in May 2008
  • Groupama launched a new travel insurance policy for SMEs in January 2008
  • Insure and Go has launched a green insurance policy that includes carbon offsets

• AXA, Aviva, RBS, Fortis and AIG are the top 5 players in the UK travel insurance market
  • AXA is the clear market leader in UK travel insurance
  • Aviva and RBS have a strong hold over the number 2 and 3 positions in the market
  • Munich Re, AIG, Groupama, and BUPA reported growth in their premium income in 2008

FUTURE DECODED

• A decrease in annual policy sales and strong competition will lead to slower growth in GWP
  • Sales of annual policies are forecast to fall in 2009, constraining premium income growth
  • Rates are expected to rise in the market, though strong competition will limit the level of growth achieved

• The UK travel insurance market is forecast to reach £847m in GWP by 2013
  • GWP is forecast to contract to £747m in 2009 due to the recession reducing the number of trips abroad
  • The market will grow to £847m in GWP by 2013

APPENDIX

• Supplementary data
  • Competitive Dynamics

• Definitions
  • Brokers
  • Bancassurers
  • Brandassurers
  • Gross written premiums
  • Geographical areas

• Research methodology
  • Primary research
  • Market context
  • Customer focus

• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Travel insurance repudiation rates by volume and value, 2006 - 08 (%)
• Table: GWP in the travel insurance market, 2004 - 08 (£000s)
• Table: UK travel insurance GWP split by policy type, 2004 - 08 (%)
• Table: UK travel insurance premium rates, 2004 - 08 (£)
• Table: Number of travel insurance policies written, 2004 - 08 (000s)
• Table: Gross loss ratios by line of business, 2004 - 08 (%)
• Table: UK travel insurance claims volume, costs and frequency 2004 - 08
• Table: UK travel insurance claims by peril 2004 - 08
• Table: Number of visits abroad by UK residents, 2004 - 08 (000s)
• Table: Number of visits abroad by UK residents by quarter, 2006 - Q1 09 (000s)
• Table: UK residents' visits abroad by destination, 2004 - 08 (000s)
• Table: UK residents' visits abroad by reason for travel, 2004 - 08 (000s)
• Table: Total number of holidays by UK residents, 2004 - 08 (000s)
• Table: UK travel insurance advertising spend, 2004 - H1 2009 (£)
• Table: Top 10 UK travel insurance advertisers by medium, H1 2009 (£)
• Table: Top 10 UK travel insurance advertisers, 2006 - H1 2009 (£)
• Table: Top 10 UK travel insurers by GWP, 2008 (£000s)
• Table: Top 10 UK travel insurers by market share, 2008 (%)
• Table: Key variables affecting travel insurance GWP, 2009 - 13
• Table: UK travel insurance GWP, 2004 - 13f, (£000s)
• Table: UK travel insurance competitors by premium income, 2005 - 08 (£000s)
• Table: Relationships between travel underwriters and major tour operators, 2009
• Table: Relationships between travel underwriters and online travel agents, 2009
• Table: Relationships between travel underwriters and low cost airlines, 2009
• Table: Relationships between travel underwriters and banks and building societies, 2009
• Table: Relationships between travel underwriters and selected brandassurers, 2009

FIGURES

• Figure: The number of visits abroad by UK residents has been falling steadily since 2006
• Figure: Financial failure cover will be appealing to consumers travelling in a recession
• Figure: Travel insurance repudiation rates have increased by value significantly in 2008
• Figure: GWP reached £763m in the UK travel insurance market in 2008
• Figure: The proportion of GWP derived from annual travel policies grew in 2008
• Figure: Travel insurance premium rates have decreased significantly over the last five years
• Figure: The number of travel insurance policies sold in 2008 increased to 23.2m
• Figure: The gross loss ratio in the travel insurance market improved in 2008
• Figure: Claims inflation drove claims costs up in 2008
• Figure: Medical expenses constituted the largest cost to the travel insurance industry in 2008
• Figure: The number of visits abroad by UK residents has been falling steadily since 2006
• Figure: The number of visits abroad declined significantly between Q1 2008 and Q1 2009
• Figure: Visits to Australia by UK residents declined in 2008
• Figure: Business related visits abroad have decreased among UK residents in 2008
• Figure: Visits abroad remained relatively static in 2008
• Figure: Spending on outdoor advertising has increased significantly since 2007
• Figure: Direct mail accounted for more than half the total advertising spend on travel insurance products in H1 2009
• Figure: Saga spent the most on advertising in the travel insurance market in H1 2009
• Figure: Equity launched Insureblue which offers tailored travel products to consumers in the UK who have been diagnosed with testicular and prostate cancers
• Figure: AXA held the largest share in the UK travel insurance market
• Figure: Travel insurance GWP is forecast to contract in 2009 before growing again thereafter