THE growth in independent travel has sparked an increase in the number of low-cost travel insurance policies sold.
No company will reveal figures for commercial reasons, but Primary and Journeys Travel Insurance are among those that have reported an increase in sales for these types of policies.
One critic of low-cost schemes, Perry Gamble chairman Jo Perry, said he is considering entering the market because there appears to be a high level of demand.
“As a broker I would like everyone to have the best policy,” he said. “That doesn’t mean the most expensive, but one that caters for the insured person’s needs. But I can understand that there is a market for low-cost policies.”
These are sold under brand names such as flight only, budget, economy and essential, but they are all similar in that they provide reduced insurance cover.
This might either be lower sums insured, such as JS Insurance Management’s Essential, which has cancellation at £1,000 and baggage at £500, or Preferential’s Worldtrekker, which only offers medical, cancellation and personal accident cover.
These policies are aimed either at people on cheap holidays or short breaks who do not need high levels of cancellation or baggage cover, or backpackers who want only essential cover. Select said its Super tier of insurance sells well to flight-only clients, who want the cancellation cover that is not offered under Economy, but as it is still low cost – 10 days Europe is £5.89 net – agents can add useful additional revenue.
Primary marketing database manager Simon Redgrove said Budget Traveller sells most to young people away for three, six or nine months, but it is also taken by older people on long-stay holidays.
“That is fine provided they are aware of what they are buying,” he added. “We produce a manual for agents which has a step-by-step guide about what is and what is not covered, and what they should tell clients, for instance in terms of excesses.”
JS Insurance Management managing director Steve King pointed out: “It is important to remember there is no such thing as a free lunch. If a policy is cheaper, it is because something has been removed and agents should be aware of that.”
The most important cover in any travel insurance policy is medical, personal accident and cancellation. JS Insurance Management figures from 1998 show medical claims at 53%, followed by cancellation at 34%.
Primary’s Budget Traveller offers all three, plus scheduled airline failure for those flight-hopping around the world.
However, baggage is an optional extra, adding 15% to the cost of Primary’s policy – £5.22 on top of the £34.80 90-day worldwide premium. The reason it is proportionately so expensive is because claims for personal belongings are third, behind cancellation. “The people who buy this policy have few possessions so baggage cover is not a priority,” said Redgrove.
Journeys offers two policies for independent travellers. Global Journeys Premier cover is a standard policy with lower sums insured, while Essential is targeted at backpackers and people away for long weekends. It offers medical, personal accident and personal liability cover only.
oPrimary: Budget Traveller. Cover for medical, cancellation, scheduled airline failure, personal accident, missed departure, personal accident and legal expenses. Net premium 90 days Europe £18.15 excluding Insurance Premium Tax. Baggage option: add 15%.
Journeys: Global Journeys. Premier covers medical, cancellation, personal accident, travel and baggage delay, missed departure, personal liability, legal expenses and baggage. Net premium 17 days Europe £9.79 excluding IPT. Essential covers medical, personal accident and personal liability only. Net premium 17 days Europe £5.39 excluding IPT.
ABC Holiday Extras: Economy Trip. Covers medical, cancellation, personal accident, personal liability, baggage, delayed and missed departure. Net premium 17 days Europe £8.74 excluding IPT.
Preferential: Worldtrekker, Covers medical, cancellation and personal accident only. Net premium 90 days Worldwide, £53, excluding baggage. One year, £175.