On The Up and Up: Why The Cost of Travel Insurance Continues To Rise
Pensioners and those with pre-existing medical conditions have seen a steep rise in the cost of travel insurance over the last few years. Driven partly by the rising cost of medical care both in the US and Europe, these changes are adding hundreds of dollars onto the cost of foreign travel.
Meeting the costs of emergency medical treatment for clients going overseas is the biggest expense facing insurers. Unfavourable currency exchange rates have combined with global rises in hospital charges to increase this outlay over recent years. This, coupled with increases in the cost of aviation fuel, and a corresponding increase in the cost of flying patients home, has forced insurers to put prices up.
The insurance industry as a whole operates on a risk assessment basis. This means that those with a statistically higher probability of requiring a payout and incurring medical costs are charged higher premium rates. The cost of insurance has risen across the board, but it is pensioners and people with a history of ill health who have been worst affected.
In many cases, these increased costs spell the end of foreign travel plans. Pensioners represent a significant portion of the travel market. Indeed, the number of passengers over the age of 75 on long-haul flights has increased by 15 per cent in recent years. This represents a meaningful potential investment for the tourist industry at a time when the global economy could use a boost. It also exemplifies an increase in general health and well-being amongst the older population. A trend that has not been factored into the statistical analysis used to calculate insurance premiums.
It is interesting that this variable has yet to be included in the models used to dictate the price customers pay. This is especially true when you consider the fact that the analysis of the data on claims suggests that younger customers are more likely to make a claim than those over 80. Of course, insurers are not the only people whose decisions impact the cost of medical travel cover. The industry employs external companies to produce data models that assess risk. These findings suggest that the inability to update these models to reflect current trends more accurately is also having an impact on the price of cover.
There have been noted increases in the cost of cancer patient travel insurance and protection for survivors. Again, these are high-risk groups who are more likely to make a claim. It can be difficult to assess exactly what kind of costs these clients have the potential to incur abroad. Their health status can change quickly in response to a variety of external stresses, not least of which is travel.
Cancer patients are also statistically more likely to cancel their travel plans, forcing the insurers to stump up the cost of the trip. This variable is another consideration when calculating costs and contributes to the rise in premiums amongst this group.
Even those who have survived cancer and can prove they have been in remission for years have been subject to above average increases in the cost of their travel insurance. This is due to the inflexibility of the data models used to assess risk, which do not differentiate between regular visits to a physician for check-ups or treatment. These models also fail to account for recent advances in modern medicine. Improvements over the last few years mean that both the survival rate and everyday health of people in remission has improved dramatically in the last decade.
The increased cost of medical attention across multiple countries has also affected persons with a history of poor health. Sufferers of epilepsy have seen the cost of their insurance rise in response to excessive medical expenses. Since seizures are more likely to occur when travelling as a result of the disruption in sleeping and eating patterns, this group were already classed as high risk. The driving cost of medical treatment, then, has led to excessive insurance premiums for these customers. Patients diagnosed with asthma and diabetes have also reported similar increases.
Rising medical costs are a contributing factor to the increased expense of travel policies to cover pregnant women. Insurers have to consider the possibility of a premature birth and the medical costs associated with that. They must also factor in the expense of accommodation abroad for a potentially prolonged period when the baby is unable to travel, as well as reparation costs when it is.
Unlike other high-risk groups, the risks associated with travelling during pregnancy are dependent on how advanced it is. This means that pregnant women will see a dramatic reduction in travel insurance costs by going after the 30-week stage. Timing travel to coincide with periods when there is a lower chance of expensive complications occurring reduces the chances of a claim on the policy. This means that insurers can offer more competitive rates, regardless of the international increase in medical costs.
Mature and highly competitive, the market for travel insurance has traditionally been driven by the demand for standalone policies. The financial downturn has seen a decrease in sales of foreign vacations and a subsequent reduction in the value of the travel insurance market. The industry response has been to increase the cost of standalone travel insurance policies. The rise in cost due to this factor has been less pronounced than it might have been. This is thanks to the expansion of the packaged account sector. It’s rise in popularity now means that more people take out annual policies or receive cover through their current accounts.
The recent improvement in the financial situation ought to correspond to a decrease in travel insurance costs as the travel market recovers more fully. Whether this proves to be the case or not remains to be seen. It seems likely that providers will suffer some pressure to facilitate a decrease. However, the cost is unlikely to ever decline to the point where it is more in line with pre-crash figures. The increased expenses associated with care abroad and repatriation mean that insurers face escalating costs. This, coupled with a likely rise in the cost of medical treatments abroad and at home, will continue to impact the cost of insurance to both customers and providers.