UK Travel Insurance 2009

Introduction

This report is an invaluable source of information on the UK travel insurance market. It provides unique market size information and discusses the main challenges and trends facing travel insurance providers. It also analyses which underwriters are leading the way in this market and forecasts what the future holds for the sector over the next four years.

Scope

*GWP forecasts to 2013, based on Datamonitor's in-house expertise and proprietary model.

*Insight into the main competitive developments taking place in the UK travel insurance market.

*A detailed analysis of the marketing spend of the top 10 UK travel insurance advertisers.

Highlights

The number of visits abroad by UK residents decreased by 16.6% between Q1 2008 and Q1 2009, from 18.2 million to 15.2 million. This is considerably different to trends in previous years, which have witnessed consistent growth in the first quarter of each year.

In 2008, advertising expenditure continued to increase in the travel insurance market to £7.7m, which can be attributed to competitors increasing their spending on outdoor advertising. Spending on outdoor advertising displayed significant growth in 2008, with spending on this type of media increasing by 307.3% to £1.3m.

The travel insurance market witnessed a small improvement in its gross loss ratio, which reduced by 0.7 percentage points from 65.4% to 64.7%. Growth in premium income was the main driver of this improvement, which grew by a larger proportion than claims incurred.

Reasons to Purchase

*Plan your future travel insurance strategy using Datamonitor's market size forecasts.

*Gain an understanding of changing consumer attitudes and behaviors amid the downturn in order to determine appropriate recessionary strategies.

*Benchmark your travel insurance business against the competition.

Report Highlights

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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The recession has changed consumer attitudes towards travel, resulting in a negative impact on premiums 2
The travel insurance market grew to £763m in 2008 2
Consumers have reduced their number of trips abroad due to a tougher economic climate 2
The level of detected fraud has increased in the UK travel insurance market 2
Travel insurance providers spent £3m on advertising in the first half of 2009 2
Marketing and advertising increased to £7.7m in 2008 but fell in the first half of 2009 2
Direct mail continued to be the dominant form of advertising in H1 2009 3
The overall number of visits abroad has fallen but consumers have increased their travel to non-European destinations 3
The number of visits abroad fell to 69 million in 2008 3
The number of visits abroad fell by 16.6% from Q1 2008 to Q1 2009 4
A decrease in annual policy sales and strong competition will lead to slower growth in GWP 4
Sales of annual policies are forecast to fall in 2009, constraining premium income growth 4
Rates are expected to rise in the market, though strong competition will limit the level of growth achieved 5
Table of Contents 6
Table of figures 7
Table of tables 8
Market Context 9
Introduction 9
The recession has changed consumer attitudes towards travel, placing an impact on premiums 9
Consumers have reduced their number of trips abroad due to a tougher economic climate 9
The cost of flying abroad will grow in November 2009 as air passenger duty is increased 9
Recessionary product innovation and marketing is evident in the travel insurance market 9
Aggregators are driving price competition in the market but have lost their appeal among insurers 10
The level of detected fraud has increased in the UK travel insurance market 11
Travel insurance GWP is estimated to have grown in 2008 despite the recession 12
The travel insurance market grew to £763m in 2008 12
The proportion of premium income generated from annual policies grew in 2008 13
Annual travel insurance premium rates fell significantly in 2008, while single trip prices rose 15
The number of travel insurance policies sold increased by 10.6% in 2008 16
The market was profitable in 2008, though claims inflation continued to grow claims costs 17
The gross loss ratio in the travel insurance market improved in 2008 17
Claims costs increased despite improving claims frequency 19
The average cost of a travel insurance claim increased significantly in 2008 19
Medical expenses continued to constitute the largest cost to the industry 21
The FSA began regulating travel agencies and airlines selling travel insurance alongside bookings 23
Five authorized firms have been created since January 2009 23
The FSA has begun scrutinizing the practice of pre-ticked travel insurance by travel firms and airlines 24
Insurers have voiced concern over the Equality Bill 24
Customer Focus 25
Introduction 25
The overall number of visits abroad has fallen but consumers have increased their travel to non-European destinations 25
The number of visits abroad fell to 69 million in 2008 25
The number of visits abroad fell by 16.6% from Q1 2008 to Q1 2009 26
More consumers are visiting Asian, Latin American and African countries 28
Business related travel abroad declined by 1.1% in 2008 30
The number of holidays taken abroad by UK residents only rose by 0.2% in 2008 31
Travel insurance providers spent £3m on advertising in the first half of 2009 33
Marketing and advertising increased by 2% to £7.7m in 2008 but fell in the first half of 2009 33
Direct mail continued to be the dominant form of advertising in H1 2009 35
The top 10 travel advertisers collectively spent £2.5m on advertising their products in H1 2009 36
Direct mail accounted for a significant proportion of the top 10 travel advertisers' budgets in H1 2009 36
Press advertising was utilized by seven of the top 10 advertisers in H1 2009 37
Only two players spent on TV advertising and both spent the majority of their budgets on this media 37
The Post Office significantly increased its advertising spend on travel insurance products in 2008 39
Competitive Dynamics 41
Introduction 41
Corporate partnerships remain a key element of travel insurance distribution in 2009 41
AXA secured two travel related partnerships in 2009 41
Mondial Assistance secured a partnership with Expedia.com 41
FirstAssist partnered with Confused.com 41
Liverpool Victoria and the Nationwide Building Society entered a new partnership in 2008 41
Product innovation continues to be a key competitive strategy among travel insurance providers 42
Equity has launched travel insurance products tailored to travelers diagnosed with cancer 42
LV= launched a new travel insurance policy in May 2008 43
Groupama launched a new travel insurance policy for SMEs in January 2008 43
Insure and Go has launched a green insurance policy that includes carbon offsets 43
AXA, Aviva, RBS, Fortis and AIG are the top 5 players in the UK travel insurance market 43
AXA is the clear market leader in UK travel insurance 43
Aviva and RBS have a strong hold over the number 2 and 3 positions in the market 44
Munich Re, AIG, Groupama, and BUPA reported growth in their premium income in 2008 44
Munich Re has achieved significant growth in its travel business and is now closing in on its competitors 44
AIG and Fortis's market share reached 6.6% in 2008 44
Groupama, BUPA and RSA also achieved strong growth even though their market shares remained static in 2008 45
Future Decoded 48
A decrease in annual policy sales and strong competition will lead to slower growth in GWP 48
Sales of annual policies are forecast to fall in 2009, constraining premium income growth 48
Rates are expected to rise in the market, though strong competition will limit the level of growth achieved 48
The UK travel insurance market is forecast to reach £847m in GWP by 2013 49
GWP is forecast to contract to £747m in 2009 due to the recession reducing the number of trips abroad 49
The market will grow to £847m in GWP by 2013 50
APPENDIX 52
Supplementary data 52
Competitive Dynamics 52
Travel insurance affinity partnerships 53
Definitions 55
Brokers 55
Bancassurers 55
Brandassurers 55
Gross written premiums 55
Geographical areas 55
Research methodology 55
Primary research 55
Market context 55
Customer focus 56
Further reading 56
Ask the analyst 56
Datamonitor consulting 56
Disclaimer 56
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List of Tables
Table 1: Travel insurance repudiation rates by volume and value, 2006-08 (%) 12
Table 2: GWP in the travel insurance market, 2004-08 (£000s) 13
Table 3: UK travel insurance GWP split by policy type, 2004-08 (%) 14
Table 4: UK travel insurance premium rates, 2004-08 (£) 16
Table 5: Number of travel insurance policies written, 2004-08 (000s) 17
Table 6: Gross loss ratios by line of business, 2004-08 (%) 19
Table 7: UK travel insurance claims volume, costs and frequency 2004-08 21
Table 8: UK travel insurance claims by peril 2004-08 23
Table 9: Number of visits abroad by UK residents, 2004-08 (000s) 26
Table 10: Number of visits abroad by UK residents by quarter, 2006-Q1 09 (000s) 28
Table 11: UK residents' visits abroad by destination, 2004-08 (000s) 30
Table 12: UK residents' visits abroad by reason for travel, 2004-08 (000s) 31
Table 13: Total number of holidays by UK residents, 2004-08 (000s) 33
Table 14: UK travel insurance advertising spend, 2004-H1 2009 (£) 34
Table 15: Top 10 UK travel insurance advertisers by medium, H1 2009 (£) 39
Table 16: Top 10 UK travel insurance advertisers, 2006-H1 2009 (£) 40
Table 17: Top 10 UK travel insurers by GWP, 2008 (£000s) 46
Table 18: Top 10 UK travel insurers by market share, 2008 (%) 47
Table 19: Key variables affecting travel insurance GWP, 2009-13 49
Table 20: UK travel insurance GWP, 2004-13f, (£000s) 51
Table 21: UK travel insurance competitors by premium income, 2005-08 (£000s) 52
Table 22: Relationships between travel underwriters and major tour operators, 2009 53
Table 23: Relationships between travel underwriters and online travel agents, 2009 53
Table 24: Relationships between travel underwriters and low cost airlines, 2009 53
Table 25: Relationships between travel underwriters and banks and building societies, 2009 54
Table 26: Relationships between travel underwriters and selected brandassurers, 2009 54
List of Figures
Figure 1: The number of visits abroad by UK residents has been falling steadily since 2006 4
Figure 2: Financial failure cover will be appealing to consumers travelling in a recession 10
Figure 3: Travel insurance repudiation rates have increased by value significantly in 2008 12
Figure 4: GWP reached £763m in the UK travel insurance market in 2008 13
Figure 5: The proportion of GWP derived from annual travel policies grew in 2008 14
Figure 6: Travel insurance premium rates have decreased significantly over the last five years 15
Figure 7: The number of travel insurance policies sold in 2008 increased to 23.2m 17
Figure 8: The gross loss ratio in the travel insurance market improved in 2008 18
Figure 9: Claims inflation drove claims costs up in 2008 20
Figure 10: Medical expenses constituted the largest cost to the travel insurance industry in 2008 22
Figure 11: The number of visits abroad by UK residents has been falling steadily since 2006 25
Figure 12: The number of visits abroad declined significantly between Q1 2008 and Q1 2009 27
Figure 13: Visits to Australia by UK residents declined in 2008 29
Figure 14: Business related visits abroad have decreased among UK residents in 2008 31
Figure 15: Visits abroad remained relatively static in 2008 32
Figure 16: Spending on outdoor advertising has increased significantly since 2007 34
Figure 17: Direct mail accounted for more than half the total advertising spend on travel insurance products in H1 2009 36
Figure 18: Saga spent the most on advertising in the travel insurance market in H1 2009 38
Figure 19: Equity launched Insureblue which offers tailored travel products to consumers in the UK who have been diagnosed with testicular and prostate cancers 42
Figure 20: AXA held the largest share in the UK travel insurance market 45
Figure 21: Travel insurance GWP is forecast to contract in 2009 before growing again thereafter 50
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