Travel in­sur­ance sees op­por­tu­ni­ties

The global tourism in­dus­try is show­ing sig­nif­i­cant growth and the out­look for 2014 is pos­i­tive. This may be good news for travel in­sur­ers, if the in­dus­try can adapt to the de­mands of a tu­mul­tuous econ­omy.

RISKSA Magazine - - CONTENTS - Do­minic Uys

Usu­ally, the pri­mary sec­tors that suf­fer in a bad econ­omy are the com­modi­ties that people can go with­out. As con­sumers cut down on their ex­penses, leisure and lux­ury spend­ing quickly falls off the pri­or­ity list and, glob­ally, lux­ury spend­ing was stag­nant by the third quar­ter of 2013. The tourism in­dus­try, on the other hand, has wit­nessed an un­ex­pected up­swing as a num­ber of for­eign cur­ren­cies lose trac­tion against the Euro and the Dol­lar. Re­cently, re­search done by Sains­bury’s Bank Travel In­sur­ance in the UK re­vealed that around 22 mil­lion people in Bri­tain were plan­ning over­seas hol­i­days for 2014, while around 20.6 mil­lion people were plan­ning a hol­i­day within the coun­try. From the re­sults, the sur­vey es­ti­mates that a col­lec­tive £ 37 bil­lion ( about R664 bil­lion) will be spent over­seas by UK cit­i­zens through­out the year. While this is good news for the tourism in­dus­try in places like Greece and South Africa, it doesn’t com­pletely prom­ise good earn­ings for ev­ery stake­holder in the tourism sec­tor. The find­ings re­veal that these hol­i­day­mak­ers still plan on re­duc­ing the cost of their va­ca­tions wher­ever they can. Around 24 per cent of the re­spon­dents in­di­cated that they in­tended to book their hol­i­days in­de­pen­dently, go­ing di­rectly to their cho­sen air­line and ac­com­mo­da­tion providers in a bid to re­duce costs. An­other 15 per cent has re­solved to keep a strict, cost- cut­ting budget while on hol­i­day. Thir­teen per cent of the sur­vey re­spon­dents in­tend to choose the most budget- friendly hol­i­day they can find. Keep­ing in mind that tourists are look­ing to slash their ex­tra costs by as much as pos­si­ble, the com­pany has al­ready started com­ment­ing pub­licly on the ra­tio­nale of buy­ing travel in­sur­ance, stat­ing: “It’s worth en­sur­ing your pol­icy has travel dis­rup­tion cover as this will cover you for in­ci­dents such as air­line fail­ure or can­cel­la­tions – with­out in­sur­ance in place, you may be left out of pocket.”

Bet­ter economies sell­ing less in­sur­ance

In­ter­na­tional mar­ket re­searcher, Fi­nac­cord’s re­search over 40 coun­tries, shows that Sains­bury is not wrong in call­ing po­ten­tial cus­tomers to ac­tion. While the global mar­ket for stand- alone travel in­sur­ance and as­sis­tance is ex­pected to rise to $ 18.1 bil­lion by 2017, the re­search shows that most of the world’s largest and most es­tab­lished travel in­sur­ance mar­kets are in de­cline; this in­cludes Europe and the US. The most op­por­tu­nity for this ex­pected growth, ac­cord­ing to Fi­nac­cord, is to be found in Latin- Amer­ica and the Asia- Pa­cific re­gion. While Europe was still re­spon­si­ble for around 33.2 per cent of gross writ­ten travel in­sur­ance pre­mi­ums in 2013, it is be­lieved that Europe’s sig­nif­i­cance within the global pic­ture is di­min­ish­ing rapidly. Fi­nac­cord’s find­ings in­di­cate that the Amer­i­cas and Asia- Pa­cific re­gions are set to over­take Europe on pre­mium sales by 2017. The shift is re­port­edly fu­elled by the rapidly ex­pand­ing out­bound leisure travel sec­tors of sev­eral de­vel­op­ing coun­tries, in­clud­ing Ar­gentina, China and In­dia, ac­cord­ing to the re­port. Fur­ther, the com­pany es­ti­mates that the Chi­nese and Saudi Ara­bian travel in­sur­ance mar­kets will un­dergo rapid ex­pan­sion by 2017.

Weather- re­lated pay­outs

The vast ma­jor­ity of in­ter­na­tional in­sur­ers have com­plained about ex­treme weather events putting strain on the sec­tor. It seems that few coun­tries are safe from the un­usual weather that has come to de­fine the decade. For the travel in­sur­ance in­dus­try, this might prove to be a mixed bag, as re­cent events in­di­cate. The bit­ter win­ter that the US ex­pe­ri­enced this year, has re­sulted in a record num­ber of flight

can­cel­la­tions. Be­tween De­cem­ber of last year and Fe­bru­ary of this year, US air­lines had can­celled more than 75 000 flights, amount­ing to around 5.5 per cent of the to­tal num­ber of flights sched­uled for that pe­riod. US- based travel in­sur­ance com­par­i­son site In­sureMyTrip re­ported that this has led to a sharp in­crease in calls from con­cerned trav­ellers and com­pany CEO, Jim Grace, states that the com­pany has seen a marked in­crease in de­mand for travel in­sur­ance prod­ucts. Europe also wit­nessed sim­i­lar hap­pen­ings at the end of last year, when Hur­ri­cane Xavier caused the can­cel­la­tion of hun­dreds of flights for two days in a row. And the ex­am­ples con­tinue to mount from un­usu­ally thick fog in Delhi ear­lier this year, to vol­canic ash in Bali, all of these cut­ting short or un­ex­pect­edly ex­tend­ing va­ca­tions through flight can­cel­la­tions. As the times we live in con­tinue to get more in­ter­est­ing, the in­ter­na­tional travel in­sur­ance in­dus­try is un­doubt­edly faced with an op­por­tu­nity and an ex­pec­ta­tion to adapt to the chang­ing land­scape.

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