The Association of British Insurers (ABI) revealed that the travel insurance loss ratio market soared in 2018 in the UK. John Lewis and Tesco Bank have pulled out of the market in response, and more providers could follow suit in the future.
Data from the ABI shows that in 2018 gross written premiums (GWP) stood at £463m ($587m) and 11,986 policies were written – the lowest point for both measures since 2004. Average premiums for single-trip policies decreased by 14.2%, while multi-trip premiums saw an increase of just 1.3%. Meanwhile the number of claims remained virtually unchanged but the cost of claims increased by 4.4%. This caused the market to see its highest-ever recorded loss ratio of 86% in 2018.
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The combination of a contracting market with increasing claims costs seems to have proven too much for some players. John Lewis and Tesco Bank pulled out of the market in March and May 2019 respectively. According to GlobalData’s 2018 General Insurance Consumer Survey, Tesco Bank is the second most popular provider within the affinity channel (tied with American Express and Thomas Cook). However, neither Tesco Bank nor John Lewis are among the top 10 most popular travel insurance providers across all distribution channels.
Other players that have not carved out a significant share could also part ways with the travel insurance market. Thomas Cook is one such candidate. The travel firm reported a loss of £1.5bn for the first half of FY 2018–19, which it largely blamed on Brexit uncertainty leading to reduced demand for EU holidays. While selling insurance alongside its holiday packages seems like a no-brainer, focusing on its core business may have to take precedent.
Indeed, Brexit continues to loom large over the travel insurance space. Depending on the nature of the UK’s departure from the EU the price of policies could increase. This has the potential to price out some consumers, reducing the GWP generated by the market even further and prompting other players to exit the market.
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By GlobalData
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