By Mike Nelson, Chief Executive Officer
As seasonal trends and demand patterns in the travel market begin to take a more familiar shape after three years of being dominated by the pandemic’s influence, we can see which aspects of travel have fundamentally changed since 2020. One of those is the prevalence, popularity, and outright necessity of travel insurance.
This makes natural sense. Covid-19 has made consumers more inclined to purchase travel insurance to protect their trips from illness, rebooking and cancellations. The huge travel demand spike in the early summer of 2022 was accompanied by a corresponding rise in flight cancellations, missed connections, lost luggage, and interrupted trips, further underscoring travel insurance’s value. Travel insurance is a natural, rational hedge against uncertainty and instability, neither of which has been in short supply over the past few years.
Travel insurance sales and selection soar
Recent travel insurance sales and attachment metrics support the notion that travel insurance is a greater priority for travelers than ever before. While the latest official figures from the United States Travel Insurance Association (USTIA) show that Americans spent approximately $1.72 billion on all types of travel protection in 2020 – a drop-off from previous years due to the pandemic’s impacts on leisure travel, other industry sources show a considerable rise in travel insurance adoption as travel has resumed.
Battleface, an international travel insurance provider, found that while only about 20% of American travelers bought travel insurance before the pandemic, nearly 60% now purchase it. Similarly, Squaremouth, another global travel insurance provider, reports that 79% of travelers are selecting trip cancellation coverage in 2022 compared to 60-65% pre-pandemic, and overall policy sales were up 180% year over year in June.
We see similar patterns on the arrivia booking platforms across multiple travel products. We saw a significant spike in travel insurance attachment rates for air bookings in the second half of 2021 as air travel resumed and more modest year-over-year increases in recent booking periods. Customers who book cruises are even more inclined to purchase travel insurance – attachment rates for cruises are about 50% higher, on average, as for air bookings, according to our platform data – and this coverage saw a double-digit YOY increase in a recent booking period as well.
Travel insurance is table stakes
It’s clear that travel insurance is now a permanent fixture of the travel experience and is an important consideration as consumers book their trips. What does that mean for loyalty programs, financial services brands, and other organizations offering travel rewards or booking capabilities?
First, travel insurance must be among the options made available to members and customers. It should be prominently featured and easily attachable to any booking, particularly for high-dollar-amount options like cruises and flights. Travel insurance helps people feel safe and offers reassurance to travelers who are all too aware of the potential for disruption and lost opportunities.
It also means there’s an opportunity to increase ancillary revenue or redemptions by offering travel insurance as an option. As overall travel booking volumes continue growing, adoption metrics suggest that the demand for travel insurance will continue to rise alongside it. That indicates the potential for additional ancillary sales for programs and organizations that offer travel insurance as an add-on for purchase and the opportunity to boost redemption rates for those that make travel insurance redeemable for points or miles. The revenue benefits are apparent; the redemption benefits can help loyalty programs reduce their points liability and increase engagement among members.
Lastly, it means companies and organizations should seek a travel benefits provider that includes a travel insurance offering on all travel products. At arrivia, we work with the world’s most reputable travel insurers to provide a broad range of coverage on cruise, air, hotel, resort, car rental and tour bookings. Travel insurance options are fully integrated into our platform and, like all our products, can be deployed seamlessly under our customers’ branding.
Our ability to be a one-stop-shop – providing both the travel options and value travelers demand, as well as the ability to protect their bookings with robust insurance – sets us apart from other travel benefits providers and helps our customers deliver more complete and positive travel experiences to their customers and members.
The appeal of travel insurance is a legacy of the pandemic that will impact the travel market for the foreseeable future. Is your organization prepared for this new normal?
About the author
Mike Nelson is arrivia’s Chief Executive Officer. Prior to arrivia, Mike was the Chief Executive Officer, Americas, for the international insurance company Allianz Partners’ Global Travel division.