UK Travel Insurance 2007

Table of Contents

• Overview
  • Catalyst
  • Summary
• Executive Summary
  • Travel insurance GWP grew slowly in 2006
    • The UK travel insurance market reached a value of £709 million in GWP in 2006
    • The majority of travelers continued to buy single trip policies in 2006
    • Claims costs in travel insurance are driven largely by medical related expenses, though fraud is a factor
      • The majority of travel insurers' claims costs are the result of paying for medical claims
      • Fraud has long been a concern for travel claims, both the professional and opportunistic varieties
    • Regulatory changes are impacting the UK travel insurance market
      • Insurers have welcomed the decision to regulate the travel trade
      • Exclusion of terrorism from some policies continue to be an area of contention
  • UK residents traveled abroad more in 2006, with visits to friends and relatives growing the fastest
    • The number of visits taken abroad by UK residents increased by 3.2 per cent in 2006
    • Europe remains the destination of choice, though trips to Africa grew the fastest in 2006
    • Visits abroad to see family and friends have grown faster than any other reason to travel
  • Travel insurance penetration rates vary by age and income
    • Older consumers have the highest and most consistent levels of travel insurance uptake
    • Higher income consumers are more likely to take out annual cover on their travels
  • The top 10 travel insurers maintained their dominant position in the market in 2006
    • The market leaders in 2006 were AXA, Norwich Union and the RBS group of companies
    • Travel insurers spent less on advertising in 2006 than in 2005, and focused on direct mail
  • The travel insurance market is forecast to reach £838 million in 2011
• Table of Contents
• Table of figures
• Table of tables
• Chapter 2 MARKET CONTEXT
  • Introduction
  • The UK travel insurance GWP increased by 1.4 per cent in 2006, as annual policy sales grew
    • The UK travel insurance market reached a value of £709 million in GWP in 2006
    • The majority of policies sold in 2006 were single trip policies
    • The majority of travelers continued to buy single trip policies in 2006
  • Claims costs in travel insurance are driven largely by medical related expenses, though fraud is a factor
    • The majority of travel insurers' claims costs are the result of paying for medical claims
    • Fraud has long been a concern for travel claims, both the professional and opportunistic varieties
  • Regulatory changes are impacting the UK travel insurance market
    • The treasury select committee has recommended that the travel trade be included under FSA regulation
      • One of the largest travel agents has begun adopting FSA controls ahead of the regulatory change
      • Insurers have welcomed the decision to regulate the travel trade
    • Exclusion of terrorism from some policies continue to be an area of contention
      • Government plans for a terrorism pool have been rejected by the industry
• Chapter 3 Customer Focus
  • Introduction
  • UK residents traveled abroad more in 2006, with visits to friends and relatives growing the fastest
    • The number of visits abroad by UK residents increased by 3.2 per cent in 2006
      • Trip numbers grew in every quarter of 2006, though Q3 saw only a marginal increase
    • Europe remains the destination of choice, though trips to Africa grew the fastest in 2006
    • Visits abroad to see family and friends have grown faster than any other reason to travel
    • Package holidays continue to fall as independent travel increases in popularity
      • Package tours to Europe continued to decline in 2006, but grew for other countries
  • Penetration rates vary by age and income, though all consumers like policies that are convenient
    • Older consumers have the highest and most consistent levels of travel insurance uptake
    • Consumers value convenience and price when selecting a travel insurance provider
    • Annual cover becomes more prevalent as consumers age, though over 60' s may have more difficulty
    • Higher income consumers are more likely to take out annual cover on their travels
  • The travel trade and direct insurers dominate distribution, and the Internet plays a key role
    • Travel insurance is purchases by consumers from a variety of sources
    • Online offerings are key to selling this relatively commoditized product
• Chapter 4 Competitive dynamics
  • Introduction
  • The top 10 travel insurers maintained their dominant position in the market in 2006
    • The market leaders in 2006 were AXA, Norwich Union and the RBS group of companies
    • The rest of the top 10 includes companies such as Fortis and St Andrews
  • A number of affinity accounts were entered into or renewed in 2006
    • Mondial renewed a number of contracts in 2006
    • AXA has won a number of affinity accounts
    • Norwich Union entered a joint venture with HSBC
    • Several other affinity accounts were also agreed in 2006 and 2007
  • Travel insurers spent less on advertising in 2006 than in 2005, and focused on direct mail
    • Travel insurance marketing spending decreased by 2.4 per cent to £5.5 million in 2006
    • Direct mail was the most important medium in 2006, though other media gained in popularity
    • The Post Office became the top travel insurance advertiser in 2006
• Chapter 5 FUTURE DECODED
  • Introduction
  • Travel insurance GWP is influenced by pricing strategies, travel and distribution trends
    • Premium rates in travel insurance are driven by competitive behavior
    • Current travel trends suggest slow yet steady growth in the number of trips abroad by UK residents
      • A terrorist attack in UK or in a popular tourist destination could negatively impact travel patterns
    • Travel insurance distribution will continue to move away from the travel trade
  • In Scenario One, the travel insurance market grows steadily throughout the forecast period
    • This neutral scenario foresees no major shocks to the market and penetration levels remain steady
    • The travel insurance market is forecast to reach £838 million in 2011, according to Scenario One
  • In Scenario Two, the travel trade is forecast to lose market share at a quicker pace in 2009
    • The portion of the market distributed through the travel trade will severely contract if travel agents choose to leave the market
    • Travel insurance GWP is forecast to contact by 2.7 per cent in 2009 due to a loss of business from the travel trade
• APPENDIX
  • Supplementary Information
    • Market Context
    • Customer Focus
    • Competitive Dynamics
  • Definitions
    • Brokers
    • Bancassurers
    • Brandassurers
    • Gross Written Premiums
    • Geographical areas
  • Research methodology
    • Primary research
    • Market Context
    • Customer Focus
      • Ipsos MORI methodology and contacts
    • Competitive Dynamics
  • Relevant links
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Travel insurance GWP, 2002-6
    • Table 2: Number of visits abroad by UK residents, 2002-6
    • Table 3: UK residents' visits abroad by destination, 2002-6
    • Table 4: UK residents' visits abroad by reason for travel, 2002-6
    • Table 5: Holidays and inclusive tours taken by UK residents, 2002-6
    • Table 6: Holidays and inclusive tours taken by UK residents, by destination, 2002-6
    • Table 7: Travel insurance product penetration by age, 2006
    • Table 8: Annual/single trip policy breakdown for UK travelers with separate travel cover by age, 2006
    • Table 9: Annual/single trip policy for UK traveler with separate travel cover by income bracket, 2006
    • Table 10: Distribution of travel insurance GWP by channel, 2002-6
    • Table 11: Top 10 travel insurers by premium income and market share, 2006
    • Table 12: Travel insurance advertising spend by medium, 2003-6
    • Table 13: Advertising spend by the top 10 largest travel insurance advertisers, 2006
    • Table 14: Scenario One: UK travel insurance GWP, 2002-11f
    • Table 15: Scenario Two: UK travel insurance GWP, 2002-11f
    • Table 16: Number of trips abroad taken by UK residents by quarter, 2002-6p
    • Table 17: Number of trips to North America taken by UK residents, by quarter 2002-6p
    • Table 18: Business travel abroad by UK residents, by destination, 2002-6
    • Table 19: Visits to friends and relatives abroad by UK residents, by destination, 2002-6
    • Table 20: Reason for purchasing travel insurance policy, 2006
    • Table 21: Top 10 UK travel insurers by premium income, 2005-6
    • Table 22: Top 10 travel insurance advertisers by medium, 2005
    • Table 23: Relationships between travel underwriters and major tour operators, 2007
    • Table 24: Relationships between travel underwriters and online travel agents, 2007
    • Table 25: Relationships between travel underwriters and low cost airlines, 2007
    • Table 26: Relationships between travel underwriters and banks and building societies, 2007
    • Table 27: Relationships between travel underwriters and selected brandassurers, 2007
  • List of Figures
    • Figure 1: The number of trip taken abroad continued to increase above 3 per cent in 2006
    • Figure 2: The travel insurance market experienced slower GWP growth in 2006 than in previous years
    • Figure 3: Insurers' books vary considerable but the average split still favors single trip policies, according to Datamonitor interviews
    • Figure 4: The majority of travel insurance coverage is obtained in the form of single trip insurance policies
    • Figure 5: Medical bills dominated the claims costs for Norwich Union in 2006
    • Figure 6: The Treasury Select Committee has set out three options for the future of travel insurance distribution
    • Figure 7: The number of trip taken abroad continued to increase above 3 per cent in 2006
    • Figure 8: Strong growth in the second quarter of 2006 gave way to marginal movement in the summer months of the third quarter
    • Figure 9: Travel to the Americas and Australia fell in 2006 while trips to all other parts of the world increased
    • Figure 10: Growth in holidays have tapered off in 2006 after strong growth in the preceding years
    • Figure 11: Travel increased in all lines but visits to see friends and family grew the most in 2006
    • Figure 12: Independently arranged holidays have gained in popularity
    • Figure 13: Packaged holidays to North America and Europe are falling as a percentage of total holidays
    • Figure 14: Market penetration is high across all age groups but older consumers display the highest levels of product uptake
    • Figure 15: Ease of obtaining the insurance as well as price are the most often cited reasons for choosing a provider
    • Figure 16: The popularity of annual policies increase as consumers age
    • Figure 17: Affluent consumers are more likely to take out annual travel policies
    • Figure 18: Travel agents and tour operators remain a significant distribution channel for travel insurance
    • Figure 19: AXA remained the market leader in 2006, accounting for one fifth of travel insurance GWP
    • Figure 20: Travel insurance advertising spending declined in 2006 after strong growth in the previous two years
    • Figure 21: The Post Office became the largest travel insurance advertiser in 2006 on the strength of its press campaign
    • Figure 22: Key to the relative importance of forecast variables
    • Figure 23: A number of factors influence travel insurance GWP in Scenario One
    • Figure 24: Travel insurance GWP is forecast to reach a value of £838 million in 2011 brought on by steady growth
    • Figure 25: A number of factors influence travel insurance GWP in Scenario Two
    • Figure 26: FSA regulation is expected to cause GWP to contract in 2009
    • Figure 27: Travel to North America has only slightly increased since 2003