By Will Louch
Holidaymakers grappling with the omicron variant this season may be tempted to spend on travel insurance, but a policy will only get them so far.
While people are again snapping up policies, the payouts for cancellations are less generous and the policies often won’t fully cover the costs of quarantine stays. With airline and hotel bookings already flexible, travel insurance may be a pricey option for a bit of peace of mind.
Demand in the $21 billion market all but froze in the early stages of the pandemic, but has since bounced back to surpass pre-crisis levels, according to travel-insurance aggregator Squaremouth. That’s because the industry has adapted, with new offerings better tailored to pandemic risks like unexpected lockdowns and the cost of treating Covid in a strange country.
“As travel rebounded, we saw our industry rebound,” despite tourism still remaining down from 2019, said Megan Moncrief, Squaremouth’s chief marketing officer. The site reported a 53% increase in travel-insurance sales after the emergence of omicron, but warns consumers to look closely at policies to make sure their concerns are covered.
The pandemic has prompted a fundamental change in how providers and consumers view travel insurance both in Europe and in the U.S., as well as who is buying the product.
Travel insurance used to be chiefly sold to retirees who had health issues and were traveling abroad. Now, younger people are buying policies targeted to protect against the fallout from the virus, including forced quarantine in hotels and medical care, according to Squaremouth.
As concerns about omicron grow ahead of the winter travel season, people are shifting toward the safety offered by cancel-for-any-reason policies. But these are around 40% more expensive than other plans, and the payouts have generally been reduced and the conditions tightened.
“Historically, it was a 75% reimbursement, now some providers have lowered this to 50%,” Moncrief said. “There has been a lot of shifting in the coverage to benefit some insurers.”
As the pandemic progresses and vaccines become more widespread, the travel landscape has adjusted to give consumers more flexibility. Airlines are waiving fees for changing flights, and most hotels allow reservations to be canceled at short notice. That shifts the focus for travel insurers to policies that protect people after they’ve left home.
The onset of the pandemic hit European insurers especially hard because their policies covered cancellations caused by border closings — ubiquitous at the time and emerging again amid concerns about omicron.
Caught off guard by a flood of claims, the industry was forced into retreat. Companies like U.K. insurance giant Aviva Plc took the unprecedented step of pulling the sale of travel policies in March 2020.
Aviva returned to the market earlier this year. The new offering provides cover and reassurance for pandemic-related scenarios, including lockdown restrictions, a positive Covid test and cancellation within 31 days of departure.
“The pandemic has allowed insurers to review travel cover and consider whether it is fit for purpose in the event of a global situation,” Sarah Poulter, a spokeswoman for Aviva, said in an email.
More stories like this are available on bloomberg.com.
