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UK Travel Insurance 2008
Datamonitor, Sep 2008, Pages: 63
Overview
Catalyst
Summary
Executive Summary
The market grew in 2007 driven by increased volume and a shift towards annual cover 2
Premium income climbed to an all time high of £718.8m 2
Annual policy premium income is estimated to have increased its proportion of the market in 2007 2
Claims frequency is low and the majority of claims are low value 2
The FSA will begin regulating the travel trade in 2009, though a number have already become tied agents 2
UK consumers continued to increase their travel abroad in 2007 3
The number of visits abroad by UK residents increased by 2.3% in 2007 3
Growth was distributed throughout the year, though the summer months remain favorite times to travel 3
The fastest growing reason for travel abroad by UK residents was visits to family and friends 4
Consumers are strongly influenced by the convenience of a product, although product penetration varies by age and income 4
Convenience, reputation and price are the key influences behind a consumers purchase decision for travel insurance 4
Younger consumers are the least inclined to purchase an annual travel insurance policy 4
Conditions were competitive as consolidation continued among distributors 4
AXAs market leading position has increased despite weakness in the travel trade 4
Marketing and advertising outlays climbed to an all time high in 2007 5
The UK market in the future will remain highly competitive, constraining premium income growth 5
Competition will remain fierce among underwriters 5
Distributors will also keep competitive pressures high 5
Annual growth averaging 4.1% per year is forecast for the UK travel insurance market between 2008 and 2012 5
Market Context
Introduction 8
The market grew in 2007 driven by increased volume and a shift towards annual cover 8
Premium income climbed to an all time high of £718.8m 8
Annual policy premium income is estimated to have increased its proportion of the market in 2007 9
Increases in foreign travel and product penetration have increased the number of policies sold 11
Premium rates declined marginally due to fierce competition, particularly for annual cover 11
Profits in the market continued to narrow as claims costs rose faster than premium income 11
The market was estimated to have remained profitable in 2007 11
Claims frequency is low and the majority of claims are low value 12
Medical expenses represent the largest claims cost for insurers 13
Regulatory change will have a large impact on the market in the near future 13
The FSA will begin regulating the travel trade in 2009, though a number have already become tied agents 13
The overseas terrorism bill is not likely to be passed, though insurers are active on the file 14
Customer focus
Introduction 15
UK consumers continued to increase their travel abroad in 2007 15
The number of visits abroad by UK residents increased by 2.3% in 2007 15
Growth was distributed throughout the year, though the summer months remain favorite times to travel 16
Europe remains the destination of choice even with other locales gaining in popularity 17
Visits to family and friends continue to grow at a higher rate than other trips, though holidays still lead 19
The fastest growing reason for travel abroad by UK residents was visits to family and friends 19
Holidays abroad are the top reason for foreign travel by UK residents 19
Consumers are strongly influenced by the convenience of a product, although product penetration varies by age and income 21
Convenience, reputation and price are the key influences behind a consumers purchase decision for travel insurance 21
Product penetration rates for travel insurance are higher among older consumers 22
The uptake of travel insurance is higher among the more affluent consumer 23
Annual cover is most popular among consumers aged between 45 and 59 and those who belong to higher income brackets 25
Younger consumers are the least inclined to purchase an annual travel insurance policy 25
Affluent consumers have a higher tendency to purchase annual policies 26
The travel trade has lost market share to cheaper alternatives 28
Direct, broker and financial product related offerings have increased market share at the expense of the travel trade 28
Internet based purchases have grown considerably 30
Compeititive Dynamics
Introduction 31
Conditions were competitive as consolidation continued among distributors 31
The merging of SAGA and AA has resulted in a fierce new competitor for underwriters and distributors 31
AIG acquired Direct Travel Insurance Services in September 2007 31
R3 Group acquired military travel and holiday specialist Forces Travel 31
Citybond acquired Aons travel book in November 2007 32
The top 10 gained market share as the market grew slowly in 2007 32
Most top 10 insurers lost market share due to declining GWP 32
AXAs market leading position has increased despite weakness in the travel trade 32
Three of the top 10 insurers experienced increasing market share in 2007 33
Norwich Unions travel insurance book continued to experience robust growth in 2007 33
Great Lakes has rapidly become a significant underwriter in the UK travel insurance market 33
ACE wrote more UK originated travel insurance in 2007 33
A number of the top insurers experienced contracting market shares in 2007 33
Few large affinity accounts changed hands in 2007 35
Mondial was one of the more active players in the travel insurance affinity market 35
Europ Assist has renewed and secured new travel accounts in 2007 36
Several other affinity accounts were also agreed in 2007 and 2008 36
Insurance providers increased their travel insurance advertising spending in 2007 37
Marketing and advertising outlays climbed to an all time high in 2007 37
Direct mail remains the principle means for advertising travel insurance, though press advertising also grew 38
The top 10 travel insurance advertisers increased their spending in 2007 40
Press and direct mail formed the bulk of the advertising spending of the top 10 40
Saga more than doubled its travel advertising outlays in 2007 to become the lead travel insurance advertiser 42
Future Decoded
Introduction 44
The UK market in the future will remain highly competitive, constraining premium income growth 44
Competition will remain fierce among underwriters 44
Distributors will also keep competitive pressures high 44
No large spike in claims is forecast due to natural disaster or terrorist event 44
The travel insurance market is forecast to attain a value of £880.5m in 2012 45
Conditions in the market are generally forecast to be flat with no big shifts in market trends 45
Annual growth averaging 4.1% per year is forecast for the UK travel insurance market between 2008 and 2012 45
The market is forecast to grow much slower if the bulk of travel agents fail to proactively adapt to regulation 47
FSA regulation in 2009 could force many smaller travel agents out of the market 47
The market will grow by an average 3.2% per year over the forecast period 48
Appendix
Supplementary Information
Market Context 51
Customer Focus 51
Competitive Dynamics 53
Affinity partnerships 55
Definitions 57
Brokers 57
Bancassurers 57
Brandassurers 57
Gross written premiums 57
Geographical areas 57
Research methodology 58
Primary research 58
Market Context 58
Customer Focus 58
Ipsos MORI methodology and contacts 58
Relevant links 59
Further reading 60
Ask the analyst 60
List of Tables
Table 1: Estimated UK travel insurance GWP, 2003-07 (£000s) 9
Table 2: Estimates of UK travel insurance GWP by policy type, 2004-07 10
Table 3: Number of travel insurance policies written, 2004-07e (000s) 11
Table 4: UK travel insurance gross loss ratio, 2004-06 12
Table 5: UK travel insurance claims volume, costs and frequency, 2004-06 12
Table 6: UK travel insurance claims costs by peril 2004-06 13
Table 7: Number of visits abroad by UK residents, 2003-07p (000s) 16
Table 8: UK residents visits abroad by destination, 2003-07 (000s) 18
Table 9: UK residents visits abroad by reason for travel, 2003-07 (000s) 20
Table 10: Travel insurance product penetration by age group, 2007 23
Table 11: Travel insurance product penetration by income bracket, 2007 24
Table 12: Split between annual and single trip polices, by age group, 2007 26
Table 13: Split between annual and single trip policies, by household income, 2007 27
Table 14: Distribution of travel insurance GWP by channel, 2003-07 (%) 29
Table 15: Top 10 UK travel insurers by market share, 2007 34
Table 16: Top 10 UK travel insurers by market share, 2007 (£000s) 35
Table 17: UK travel insurance advertising spend by media, 2003-07 39
Table 18: Top 10 UK travel insurance advertisers by medium, 2007 (£) 42
Table 19: Top 10 UK travel insurance advertisers, 2005-07 (£) 43
Table 20: Key variables affecting travel insurance GWP, neutral scenario, 2008e-12f 45
Table 21: UK travel insurance GWP, neutral forecast, 2003-12f, (£000s) 47
Table 22: Key variables affecting travel insurance GWP, pessimistic scenario, 2008e-12f 48
Table 23: UK travel insurance GWP, pessimistic forecast, 2003-12f, (£000s) 50
Table 24: Number of trips abroad taken by UK residents by quarter, 2004-07p 51
Table 25: Business travel abroad by UK residents, by destination, 2003-07p 51
Table 26: Visits to friends and relatives abroad by UK residents, by destination, 2003-07p 52
Table 27: UK travel insurance competitors by premium income, 2005-07 (£000s) 53
Table 28: UK travel insurance competitors by market share, 2005-07 (%) 54
Table 29: Relationships between travel underwriters and major tour operators, 2008 55
Table 30: Relationships between travel underwriters and online travel agents, 2008 55
Table 31: Relationships between travel underwriters and low cost airlines, 2008 56
Table 32: Relationships between travel underwriters and banks and building societies, 2008 56
Table 33: Relationships between travel underwriters and selected brandassurers, 2008
List of Figures
Figure 1: Visits abroad have increased steadily in recent years 3
Figure 2: Premium income has continued to climb despite declining rates 8
Figure 3: The shift towards annual cover has been slight but steady in the last two years 10
Figure 4: Visits abroad have increased steadily in recent years 15
Figure 5: Increases in travel were noticeable in Q1 2006 Q4 2005 and 2007 as well as Q2 2007 17
Figure 6: Trips to Asia and Africa have increased between 2003 and 2007 18
Figure 7: Visits to friends and relatives have increased 19
Figure 8: Holidays abroad remain the single most common reason to travel abroad 20
Figure 9: Convenience was a highly valued factor for consumers purchasing travel insurance 21
Figure 10: Product penetration increases with the age of consumers, with older consumers more likely to purchase travel insurance 22
Figure 11: The uptake of travel insurance is likely to increase as income grows 24
Figure 12: Consumers aged 45-59 are more likely to purchase their travel insurance in the form of annual cover 25
Figure 13: Consumers with lower household income are more inclined to purchase single trip policies 27
Figure 14: The travel trade is still the single most important channel when measured by GWP 29
Figure 15: AXA retains its dominant position in the market with strong growth in premium income 32
Figure 16: Providers have increased marketing outlays significantly in 2007 38
Figure 17: Direct mail accounted for almost half of all expenditures on travel insurance advertising 39
Figure 18: Sagas advertising spend on direct mail is more than double its nearest rivals spend 41
Figure 19: Steady growth over the forecast period will be driven by increases in premium rates and higher trip volumes 46
Figure 20: The market will sacrifice almost £57m of potential value in 2009 if a large proportion of travel agents cease offering cover 49
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