Travel Insurance: A Changed Landscape

The travel landscape has shifted dramatically over the past two years. From travel disruptions resulting from coronavirus variants to the recent surge in gas prices to the abrupt decline in both travel insurance sales and claims, it’s been a wild ride for travelers and insurance companies alike.

Here’s what has changed in the travel market over the last two years, how these changes have influenced today’s travel insurance product development, and what we expect to see moving forward.

Flights as a measure of travel insurance health

Looking specifically at the number of flight bookings is the biggest indicator of what’s happening in the travel market today. Flights are a key indicator because historically, travel insurance was purchased more often when a flight was involved.

In 2019, we saw 2.5 million travelers a day pass through TSA. The initial landfall of Covid-19 in March 2020 threw the market into near-instant havoc, experiencing a sharp decline seemingly overnight. Since then, the travel industry has shown great strides in rebounding.

What’s important about today’s counts is the behavior or seasonality characteristics noted at the end of the year (“holiday season”) that mimic pre-pandemic travel, except at a lower level. However, Americans’ appetite for travel is gaining momentum quickly, resulting in numbers that are nearly back to 2019 levels in two short years.

We are also seeing similar travel behavior from 2019 mimicked in the first four months of 2022—further proof that the market has a strong foothold on the path back to “normalcy.”

Flights and cruises are on the rebound

Beginning in 2020, the largest dip in travel behavior was due to the onset of Covid-19 first reaching the United States. Since that initial bottoming out, the market has made increasing trends upward. Domestic travel has started to gain momentum and is increasing at a rapid pace. As of March 2022, U.S. travel is only roughly 5% below 2019 levels, which is heavily weighted toward domestic travel. International travel experienced a more sluggish rebound in 2020 but is strengthening at nearly the same rate as domestic travel in 2021.

The cruising market took a near-instant nosedive once the outbreak of Covid-19 reached the United States. Today, cruising travel is still less than 50% of 2019 levels. During 2021, the cruising market has shown gradual (but slow) growth. Younger travelers are wary of the potential for virus transmission in enclosed spaces and are therefore not eager to board a ship anytime soon. However, older travelers appear to have a high likelihood to start cruising again soon. This is especially good news since the last of the baby boomers are reaching retirement age, meaning they have ample time and money for travel.

More travelers are hitting the road

Increased road travel is altering insurance product development to accommodate travelers’ changing needs. Travel by car and RV is having its day in the sun. According to the U.S. Travel Association, RV or car trips jumped in popularity in 2020 and 2021— a trend that appears to be continuing in 2022. Great news for the industry: 85% of Americans are expecting to travel this summer. Roughly 80% plan to travel in their personal or rental vehicles and 46% plan to fly.

Today’s travel insurance product offerings have been modified to focus on needs specific to road travelers, including medical coverage and rental car collision, as opposed to air travel-centric products like trip cancellation/interruption, missed flights, or lost baggage.

That said, 59% of American travelers believe travel prices are too high right now which has prevented them from traveling in the past month. The travel price index is 16% higher than 2019 levels, mostly due to rising fuel costs. However, this statistic does not indicate declines in future outlooks.

From pandemic to endemic: how coverage is changing

Many carriers considered pandemics like Covid-19 to be foreseeable events, so travel products have historically excluded events such as pandemics and epidemics. As a result, there was immense confusion among policyholders and insurance companies regarding specific coverages and exclusions for insureds who purchased travel insurance both before and after the initial outbreak of the virus.

That said, carriers continued to cover trip cancellation and trip interruption as well as medical expenses and emergency evacuation if an insured became ill, even due to the coronavirus.

As the virus moves from pandemic (actively spreading across borders) to endemic (a constant presence), insurance carriers are adjusting their insurance product development to reflect the “new normal” in the travel industry.


Policies generally do not cover cancellations or interruptions based on fear of contracting the virus, which is why “cancel for any reason” (CFAR) became such a hot topic. CFAR or IFAR (interruption for any reason) covers the cancellation or interruption of a trip under any circumstance. Even if the insured simply doesn’t feel like going on the trip anymore. Insureds who purchased this “any reason” benefit are covered and could recoup at least a portion of their trip. These benefits have since become a very sought-after benefit by insureds seeking peace of mind, which is especially relevant in case a new Covid-19 variant is detected.

Carriers are also reassessing pandemic and epidemic exclusions, opting to include them as covered perils in their policies. This is especially important as insureds start to take a closer look at their policies to determine what is covered and what isn’t.

Government-issued travel advisories

One of the coverages also being called into question today is trip cancellation or interruption due to government restrictions based on the U.S Department of State travel advisories. While cancellation or interruption may not cover the pandemic in general, cancellation or interruption because of government restrictions or travel advisories of level 4 (“Do not travel”) that could potentially include Covid-19 or various other reasons may be covered if the policy includes government restrictions as a listed peril in the policy. This may also include the CDC travel risk assessment of level 3 (“high risk”) which was recently revised and unveiled. Otherwise, government restrictions would not be covered. However, CFAR or IFAR would cover these scenarios.

Increased interest in travel insurance

Fortunately, the United States is essentially “back to normal” for domestic travel within the 50 states with no mandatory pre-arrival testing or quarantines. The federal mask mandate on commercial transit has also been discontinued. Vaccine and mask mandates are now based on state and city ordinances. The number of countries without travel restrictions also continues to climb as 2022 rolls on, which means the government restriction peril may no longer be as valuable as it once was.

A survey from the Automobile Club of America (AAA) found that one-third of U.S. travelers said they are more likely to buy travel insurance for their trips through the end of 2022, specifically because of the pandemic. 69% of travelers said, “the ability to cancel a trip and get a refund” is most important to them when considering travel insurance for an upcoming trip.

As more people become aware of the existence and usefulness of travel insurance, sales have seen a 10% to 20% jump over 2019 numbers with spikes as high as 53% increase over 2019 following news of the Omicron breakout. This increase in sales has resulted in a better claims experience than previously seen since anti-selection is being hedged against broader market sales.

The average frequency of 2021 claims based on internal data was less than half that in 2019. As a percent of total claims, the initial spike of CFAR claims has dampened but continues to be a highly utilized claim which we expect to continue into 2022, given consumers’ new knowledge about its value.

A new landscape

Covid-19 is here to stay. The initial fear of the virus is winding down, but the industry will continue to see spikes and dips as each new variant emerges. Travelers and insurers must learn to live with this new landscape and respond accordingly. Insurance companies must embrace this new landscape and take these shifts into account during their product development.

Another big takeaway for travel insurers is their ability to monitor claims. Claims submitted under CFAR should be categorized to determine those that are really for Covid-19 but may be disguised as something else. Tracking Covid-specific claims will help do just that. Likewise, more insurers have options specific to pandemic coverage and are providing coverage as its own benefit (trip cancellation, trip interruption, medical expense, and evacuations).

As consumers begin to feel more confident in their return to travel, the goal is to provide equal comfort in their protections through travel insurance.

Contact Perr&Knight and let our experienced actuaries and product design consultants help you develop insurance products that match today’s market.

From Our Actuarial Experts: New Trends in Accident & Health

Last year was a major disruptor for consumers, insurance companies, and state departments of insurance (DOI). The ripple effects of the COVID-19 pandemic are still playing out, causing changes to consumer behavior and influencing how insurance companies serve them.
Here are some of the recent trends we’ve seen in accident & health coverage – and how insurance companies can respond more effectively to these changing times.

Pandemic-related coverages

Businesses are re-opening, employees are returning to in-person work, and international travel is increasing in popularity. Despite the near-universal desire to return to normalcy, COVID-19-related interruptions are still part of the equation. Insurance companies are faced with new opportunities to provide coverage for COVID-related medical care and travel changes.
Some of the emerging products we have seen include:

  • Coverage for work-related vaccine mandates
  • Coverage for mandatory quarantine
  • Trip cancellation or trip interruption coverage in case of pandemics or COVID infections
  • Coverage for telemedicine or other virtual care

Self-insured companies are under greater pressure to determine the cost of things like testing or vaccination-related expenses for their employees. Support from experienced actuaries can help accurately estimate these costs.

Younger consumers entering the market

The population of people purchasing insurance is shifting. This is a trend we have seen gain momentum over the previous few years with no sign of slowing down. More millennials (aged approximately 25-40) and Gen Z (age 24 and younger) consumers are buying insurance products. This shift in consumer base has a two-pronged effect: what products they seek, and how they are purchasing.
Older generations were content to work with a trusted insurance agent and prioritized a person-to-person relationship. Millennial and Gen Z consumers are more focused on instant information and instant gratification. Their digital-first consumption habits are causing insurance companies to re-evaluate how they offer products and are opening opportunities for Insurtech companies to fill the gap.
While Insurtech companies may have the technology covered, many have limited experience in the insurance space. Meanwhile, established insurance companies may have the knowledge of insurance product development but must partner with a technology provider to deliver products to consumers. Working with experienced insurance product development partners can help bridge the gap to make sure all products conform to regulatory standards.

The workforce is changing

As the gig economy continues going strong, more workers are tasked with securing coverage on their own. The federal insurance mandate is no longer in place, so consumers can be more creative with their health coverage. They want greater flexibility to choose plans and coverages that align with their needs and budget.
Some workers may not want or need full-blown health insurance plans, instead opting for more cost-effective coverages such as accident-only, major medical, critical illness, gap insurance coverage, or other supplemental plans.
Now is the time to revisit the scope of your medical products to determine if there are areas to offer products that align with today’s self-empowered purchaser. Insurance product development experts like Perr&Knight can provide insight into correct pricing and assist with rate and forms filings to bring these products to market as quickly as possible.

Short-term accident products

More and more insurance companies are offering lifestyle-related products that cover insureds under specific conditions for short periods of time. We’re seeing companies develop medical expense or accident indemnity products related to adventure sports, certain vacation activities, and equipment usage (ex. electric scooters).

Partner with insurance product development experts

Today’s trends unlock new possibilities for insurers to offer coverages that align with the times and evolving consumer expectations. However, everyone in the industry knows that product development, rate development, form filing, and approvals take time. Working with experienced actuaries and insurance product development specialists can accelerate your process and ensure you are not overlooking any critical elements that could slow your time to market.

Develop new products that match consumer expectations. Contact our insurance product development experts to start a conversation.

Travel Insurers Must Pivot in the Wake of COVID-19

Authors: Crystal London, FSA, MAAA and Susan Cornett, FLMI, AIRC, CFE
As international travel restrictions remain in place, more and more Americans are planning domestic travel this summer and fall. According to the RV Industry Association, 46 million people will take road trips in the next twelve months. RV rentals and sales are also way up. This shift in focus to domestic, road-based trips means insurers must remain flexible and be prepared to offer smaller packages that align with emerging trends in travel planning.

Existing policy offerings are less relevant

Traditional travel insurance tends to cover issues impacting travel overseas, cruises, or big ticket domestic trips such as Hawaii or the U.S. Virgin Islands. As insureds take more domestic trips, especially by vehicle, expensive coverages such as trip cancellation/interruption, missed flight connection, lost baggage coverage and international medical coverage are much less relevant. Instead, insurance product development teams should shift thinking toward ancillary coverages that address the myriad of risks associated with travel by car or RV/camper.

Concentrate on road-based benefits

Travel insurance benefits in the COVID era are more nuanced than the big-ticket airline/cruise packages that were previously common. Given that more people are traveling by vehicle, ancillary coverages working in tandem with existing auto and health policies provide peace of mind for travelers spending more time in their own vehicles or rented cars, trucks and RVs.
Here are some common coverages that will be in greater demand as road trip travel increases throughout the summer and into the fall:

  • Rental vehicle damage
  • Excess medical expense
  • Emergency evacuation
  • Accidental death & dismemberment
  • Vehicle return
  • Return of traveling companion and/or minor child(ren)
  • Emergency hotel coverage
  • Hotel overbooking

Policies should address unexpected disruptions to road trips

A shift toward road travel provides an opportunity for insurers to develop additional benefits addressing the specific needs of today’s domestic travelers. As people hit the road, many bring along the family pet, creating a need for coverages such as pet emergency medical. Pet return and kennel delay insurance are also valuable should the insured have a loss and can’t get the family pet home or can’t get home in time to pick up the pet. Campgrounds may replace hotels when it comes to cancellation fees or overbooking risks, so insurers may consider offering camping-specific policies. Travelers may also require additional insurance to cover damage to rented properties that goes beyond general liability covered by vacation home rentals such as Airbnb or VRBO. All of these policies are launching points for insurers to develop creative coverages for domestic travelers.

Increasing importance of “cancel for any reason” and pandemic-inclusive policies

Because COVID-19 is still far from resolved, we anticipate travelers will remain skittish for at least the upcoming six months, if not longer. However, given the attractive prices offered by airlines and hotels, some travelers are beginning to plan trips far into the future. With the current level of uncertainty surrounding COVID-19, “cancel for any reason” policies are more attractive to consumers. When international travel does resume, unpredictable border re-openings and attraction re-openings will create a higher demand for pandemic- and epidemic-inclusive policies, as COVID-19 shifts from an “unforeseen” classification to a foreseen event and consumers will look for policies that will provide coverage.

Re-think your customer base

During this time, insurers should shift focus from airlines and cruise company partnerships to add-on coverages through car and RV rental companies. Travel insurance isn’t usually top-of-mind for domestic vacationers, so direct-to-consumer marketing efforts should also increase. Now is the time to initiate outreach to new and existing policyholders to increase awareness and urge additional domestic travel protections. Additionally, since most travelers search online for trip insurance, make sure your company is visible with coverages applicable to their shifting needs. You may not be offering appropriate policies, but your competitors likely are.

The time to act is now

If your company doesn’t currently offer a wide set of coverage for domestic travel, our experienced product development and rate development teams can help. We’ll help you discover which benefits are most important to insureds in this environment and conduct valuable competitive analysis to reveal your competitors’ actions.
In many cases, insurers already have aspects of the above coverages in place, so your company may not require a lengthy insurance product development phase to address the needs of today’s travelers. We can help you develop new coverages or adjust language or rates on existing policies to provide a better fit. Based on our deep experience as insurance consultants, our assistance with form development, rate development and state filings can accelerate your time to approval.
Travel insurers are facing spikes in service requests that are as yet not totally known. Airlines and crowded resorts are out of favor. Instead, industry experts are seeing a transition to road trips and long-term rentals. Since major revenue streams are currently stalled, insurers must make changes to keep premiums flowing. For most providers of travel insurance, this means focusing on creating a higher volume of smaller-premium offerings until more expensive travel returns to popularity, which could take years.

Talk to Perr&Knight’s insurance consulting experts to make sure your travel policies are the right fit for today’s customers.

The Impact of COVID-19 on the Travel Insurance Industry

Authors: Crystal London, FSA, MAAA, Consulting Actuary, and Susan Cornett, FLMI, AIRC, CFE, Manager A&H Product Design
Coronavirus Disease 2019 (COVID-19) has had a dramatic impact on the travel industry – likewise the travel insurance industry – since it first made landfall in the U.S. in January. Travel ground to a near-halt in record time as state and federal governments ordered non-essential businesses to shut down, international borders to be closed, and shelter-in-place measures to be adopted, usually with little advance notice.
According to the TSA, airline travel has decreased by approximately 90% from mid-March to mid-May compared to the same period in 2019. This lack of movement has in turn resulted in a dramatic decrease in the need for travel insurance over the past two months, creating serious consequences for the travel insurance industry.

Lessons from the past

The SARS outbreak of 2002-2004 sheds some light on the role of pandemics in the travel insurance industry. After that event, most carriers updated their policies with exclusions and limitations specifically related to pandemics and epidemics. This has led to some confusion among insureds, as those who purchased travel insurance recently automatically assumed their canceled or interrupted trips would be covered. For many carriers, as of January, COVID-19 has fallen into the category of a “foreseen event” as a result of a pandemic, thereby disqualifying it from coverage applying to trip cancelation or trip interruption. However, an exception to this is if the policy includes Cancel for Any Reason or Interruption for Any Reason. As the benefit name implies, the cancelation or interruption is covered under any circumstance. Therefore, insureds who have purchased this “any reason” benefit are covered and could recoup a least a portion of their trip.
That said, most carriers are still offering trip cancelation/interruption coverage as well as medical expense and emergency evacuation coverage if an insured becomes ill, even if due to coronavirus.
However, if insureds cancel or interrupt their travel due to fear of the pandemic (not illness as a result of the pandemic), this reason may not be covered. Given marketing needs and distribution channels, there is no uniform policy across carriers as to when or why these benefits are not covered. Insureds are receiving multiple answers from multiple sources, further adding to their confusion.

What’s next for the travel insurance industry?

Company business is down significantly right now, with some travel insurance carriers seeing double digit decreases in business. Travel insurance coverage isn’t selling because no one is traveling. On the other hand, this decrease in travel has led to a significant decrease in claims payments, so some balancing is occurring.
Some carriers have responded to the pandemic by offering refunds outside the normal free look period or a change of coverage effective date if insureds postpone or reschedule their trip due to coronavirus. The hope is to keep the business on the books, not cancel outright.
Insurers may also face difficultly obtaining reinsurance for travel, especially for catastrophic events. Reinsurance companies, too, are trying to mitigate their risk. Given the current circumstances, reinsurers might be warier, especially due to recent medical models not anticipating a vaccine for another 12-18 months, or travel restrictions remaining in place until testing is widespread or a vaccine is available.

New state filings considerations

Going forward, we anticipate new regulatory compliance hurdles as a result of COVID-19, but to what extent is not yet clear.
Some states have fast-tracked regulatory measures dictating how carriers must address refunds. New York introduced state bill S8124B in March requiring travel insurance companies to refund premiums for COVID-19 related cancelations, but only in the circumstance that no payable claim has been filed already. Additionally, New York Department of Financial Services issued Insurance Circular Letter No. 4 in March allowing carriers to offer cancel for any reason benefits, which it previously did not allow in the state.
We anticipate additional hurdles and delays in future filings for travel insurance. Not just because many Departments of Insurance are operating with a reduced capacity (many are working from home, too), but because there will likely be added scrutiny on travel policies. We also anticipate questions regarding, and possible objections to, the use of epidemic and pandemic exclusions. We have yet to see the full scope of changes regulators will introduce in the coming weeks and months. The travel insurance industry is still adjusting to changes following the 2017 Market Analysis Working Group, subsequent regulatory settlement agreements, and introduction of model travel laws by both NAIC and NCOIL. Those states that have not yet adopted a version of the model law may take the opportunity to address pandemics and epidemics in the legislation at such time as it is adopted.
Make sure your state filings department or insurance support services partner keeps abreast of each state’s updated regulations and statutes. Pay close attention to the release of applicable new bills and circulars. Continuously monitor updates to make sure you follow the new guidelines produced by state DOIs as this unprecedented event continues to unfold.

Opportunities for the future

The news isn’t all bad. After weeks in quarantine, people are beginning to plan vacations and future travel again. They’ve had plenty of time to brainstorm a dream vacation and government stimulus checks have supplied an infusion of cash. In an attempt to generate revenue, travel suppliers like airlines and cruises are offering deep discounts, enticing people to book now for travel in the future.
For many travelers, trip cancelation insurance has never been top-of-mind ­– until now.  People who have never thought of purchasing travel insurance are seeing the value of coverage and may opt for the added peace of mind when booking.
We are also seeing emerging opportunities for carriers to offer policies reflecting a changing travel landscape. Insurance carriers are reassessing coverage options, some opting to include additional pandemic and epidemic perils within their policy. Conversely, instead of added exclusions or limitations, some carriers are weighing options to offer coverage specifically for COVID-19 related issues.
We anticipate a flurry of new state filings in the coming months as carriers rush to reshape their policies to conform to changing customer demands and updated regulatory requirements that are part of this “new normal.”
Right now, our best advice to mitigate the effects of the pandemic is to remain flexible. Prepare to give up a benefit or “unforeseen reason” clause in favor of keeping your eye on the big picture.  As DOIs update regulations to adapt to changing circumstances, carriers, too, will need to remain open-minded and ready to make necessary adjustments as we all write a new future for the travel insurance industry.

Need help navigating the fallout from COVID-19? Our actuarial and product design experts are here to answer your questions and develop a solid plan to move forward.

Unique Challenges of Travel Insurance

According to the U.S. Travel Association, Americans took 2.2 billion leisure trips in 2016. This skyrocketing volume of leisure travel opens up new opportunities to develop additional creative products to protect travelers from a range of travel-related setbacks. Today’s travel insurance products run the gamut from standard offerings such as flight cancellation due to illness, to buying the first round of drinks after scoring a hole-in-one on the green, to covering your pet’s stay at the kennel when your return trip is delayed.
But travel insurance product development is like playing a game of Twister. Filing requirements for New Mexico? Put your left hand on blue. Florida? Right hand on yellow. When the dust settles, you’re left with a complicated balancing act of variables that shift according to jurisdiction and coverage.
When you file other lines of business, such as personal auto or homeowners, it’s usually the same SERFF TOI in all 51 jurisdictions. But travel insurance comes with a unique set of stipulations that vary by jurisdiction, coverage type and, in some jurisdictions, coverage amount.
During decades of providing regulatory compliance services, we have seen the ongoing changes that impact travel insurance policies. Here are some of the challenges that are unique to this evolving line of business.

The regulatory environment is changing

As travel insurance has become more popular, jurisdictions are taking a closer look at these policies. This increased scrutiny has resulted in several companies voluntarily entering into regulatory settlement agreements with various Departments of Insurance. Other companies are leaving the market entirely.
In addition to the Market Analysis Working Group (MAWG), NAIC also has a travel insurance working group in the process of drafting a new model law. NCOIL has also developed their own model. These new frameworks will require you to take a closer look at the entire scope of your travel insurance line of business:

  • If group coverage, is the master policyholder a valid group?
  • Are your distribution channels appropriately licensed for each jurisdiction?
  • How do your distribution channels operate?
  • Are the rates consistent across the channels, with all other variables (trip cost, residence, etc.) the same?
  • Do you have processes in place to monitor or audit those distribution channels?

To avoid stiff penalties, make sure you have established the appropriate regulatory compliance processes.

Install adequate support when offering inconvenience benefits

Many insurers are offering inconvenience benefits to make their customers’ lives easier when filing a claim. Things like ultra-quick disbursements or payments via PayPal. If your company is considering offering this level of customer service on travel insurance products, be sure that you have the right operational structure in place before you go to market.

Current regulatory settlement agreements can impact your offerings

Even if you haven’t been flagged for violation, make sure you stay current with the results of regulatory settlement agreements, so you are aware of what regulators are looking for. Your in-house teams or regulatory compliance services provider should issue regular reports to keep your product development team aware of the settlement agreements that can impact your offerings. The Missouri State DOI has compiled a list of the results of recent market conduct investigations, including settlement agreements. This comprehensive list is a good place to start.

Avoid benefit overlap

There is potential for benefit overlap with both A&H and P&C coverages when issuing travel insurance. Some jurisdictions require additional disclosures to remind consumers that coverage is limited or supplemental. Other jurisdictions are requiring insurers to clearly state that a trip cannot exceed 6 months. Otherwise, policies that are too rich in accident and health coverage might raise a red flag with the DOI, making it appear that you are trying to circumvent the Affordable Care Act.
In addition to accident and health considerations, insurers should establish a clear demarcation between traveler benefits and homeowners’ or renters’ insurance plans. Insureds should be reminded to review their existing coverage so that they are aware of overlapping coverage.

Be aware of regulatory requirements regarding excess

Some jurisdictions will not allow excess plans and will require you to be the first payer. These changes can affect rates and filing requirements between jurisdictions. Pay attention to details like this before you undertake the filing process.

Product architecture can vary by jurisdiction

Instead of a single countrywide travel insurance policy modified for each state, you may need multiple versions. This could be because a state requires a split filing (A&H and P&C), or a state doesn’t allow variability. A&H benefits in excess of $50,000? New Hampshire requires insurers to file the P&C coverages separately from the A&H. Check with each state’s Department of Insurance for product architecture requirements as you begin product development.
Hasty or sloppy travel insurance product development jeopardizes approval, which impacts your speed to market. Don’t jump into the travel insurance line of business without taking a careful look at what will be required for every policy in every jurisdiction.
At Perr&Knight, our team of actuaries and product development experts are familiar with the extensive list of requirements for both accident and health and property and casualty insurance. This deep understanding of both sides of the coin can help you navigate the challenges that arise when drafting travel insurance policies.

For more information about how Perr&Knight’s insurance product development services can help you increase speed to market on your travel insurance products, contact us today.