Table of Contents

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Travel insurance GWP grew slowly in 2006 2
The UK travel insurance market reached a value of £709 million in GWP in 2006 2
The majority of travelers continued to buy single trip policies in 2006 2
Claims costs in travel insurance are driven largely by medical related expenses, though fraud is a factor 2
The majority of travel insurers' claims costs are the result of paying for medical claims 2
Fraud has long been a concern for travel claims, both the professional and opportunistic varieties 2
Regulatory changes are impacting the UK travel insurance market 2
Insurers have welcomed the decision to regulate the travel trade 2
Exclusion of terrorism from some policies continue to be an area of contention 3
UK residents traveled abroad more in 2006, with visits to friends and relatives growing the fastest 3
The number of visits taken abroad by UK residents increased by 3.2 per cent in 2006 3
Europe remains the destination of choice, though trips to Africa grew the fastest in 2006 4
Visits abroad to see family and friends have grown faster than any other reason to travel 4
Travel insurance penetration rates vary by age and income 4
Older consumers have the highest and most consistent levels of travel insurance uptake 4
Higher income consumers are more likely to take out annual cover on their travels 5
The top 10 travel insurers maintained their dominant position in the market in 2006 5
The market leaders in 2006 were AXA, Norwich Union and the RBS group of companies 5
Travel insurers spent less on advertising in 2006 than in 2005, and focused on direct mail 5
The travel insurance market is forecast to reach £838 million in 2011 5
Table of Contents 6
Table of figures 7
Table of tables 8
Chapter 2 MARKET CONTEXT 9
Introduction 9
The UK travel insurance GWP increased by 1.4 per cent in 2006, as annual policy sales grew 9
The UK travel insurance market reached a value of £709 million in GWP in 2006 9
The majority of policies sold in 2006 were single trip policies 10
The majority of travelers continued to buy single trip policies in 2006 11
Claims costs in travel insurance are driven largely by medical related expenses, though fraud is a factor 12
The majority of travel insurers' claims costs are the result of paying for medical claims 12
Fraud has long been a concern for travel claims, both the professional and opportunistic varieties 13
Regulatory changes are impacting the UK travel insurance market 13
The treasury select committee has recommended that the travel trade be included under FSA regulation 13
One of the largest travel agents has begun adopting FSA controls ahead of the regulatory change 14
Insurers have welcomed the decision to regulate the travel trade 15
Exclusion of terrorism from some policies continue to be an area of contention 15
Government plans for a terrorism pool have been rejected by the industry 15
Chapter 3 Customer Focus 17
Introduction 17
UK residents traveled abroad more in 2006, with visits to friends and relatives growing the fastest 17
The number of visits abroad by UK residents increased by 3.2 per cent in 2006 17
Trip numbers grew in every quarter of 2006, though Q3 saw only a marginal increase 18
Europe remains the destination of choice, though trips to Africa grew the fastest in 2006 19
Visits abroad to see family and friends have grown faster than any other reason to travel 21
Package holidays continue to fall as independent travel increases in popularity 22
Package tours to Europe continued to decline in 2006, but grew for other countries 24
Penetration rates vary by age and income, though all consumers like policies that are convenient 26
Older consumers have the highest and most consistent levels of travel insurance uptake 26
Consumers value convenience and price when selecting a travel insurance provider 27
Annual cover becomes more prevalent as consumers age, though over 60's may have more difficulty 28
Higher income consumers are more likely to take out annual cover on their travels 29
The travel trade and direct insurers dominate distribution, and the Internet plays a key role 30
Travel insurance is purchases by consumers from a variety of sources 30
Online offerings are key to selling this relatively commoditized product 32
Chapter 4 Competitive dynamics 33
Introduction 33
The top 10 travel insurers maintained their dominant position in the market in 2006 33
The market leaders in 2006 were AXA, Norwich Union and the RBS group of companies 33
The rest of the top 10 includes companies such as Fortis and St Andrews 33
A number of affinity accounts were entered into or renewed in 2006 35
Mondial renewed a number of contracts in 2006 35
AXA has won a number of affinity accounts 36
Norwich Union entered a joint venture with HSBC 36
Several other affinity accounts were also agreed in 2006 and 2007 36
Travel insurers spent less on advertising in 2006 than in 2005, and focused on direct mail 37
Travel insurance marketing spending decreased by 2.4 per cent to £5.5 million in 2006 37
Direct mail was the most important medium in 2006, though other media gained in popularity 37
The Post Office became the top travel insurance advertiser in 2006 39
Chapter 5 FUTURE DECODED 41
Introduction 41
Travel insurance GWP is influenced by pricing strategies, travel and distribution trends 41
Premium rates in travel insurance are driven by competitive behavior 41
Current travel trends suggest slow yet steady growth in the number of trips abroad by UK residents 41
A terrorist attack in UK or in a popular tourist destination could negatively impact travel patterns 41
Travel insurance distribution will continue to move away from the travel trade 41
In Scenario One, the travel insurance market grows steadily throughout the forecast period 42
This neutral scenario foresees no major shocks to the market and penetration levels remain steady 42
The travel insurance market is forecast to reach £838 million in 2011, according to Scenario One 43
In Scenario Two, the travel trade is forecast to lose market share at a quicker pace in 2009 45
The portion of the market distributed through the travel trade will severely contract if travel agents choose to leave the market 45
Travel insurance GWP is forecast to contact by 2.7 per cent in 2009 due to a loss of business from the travel trade 46
APPENDIX 49
Supplementary Information 49
Market Context 49
Customer Focus 49
Competitive Dynamics 51
Definitions 55
Brokers 55
Bancassurers 55
Brandassurers 55
Gross Written Premiums 55
Geographical areas 55
Research methodology 56
Primary research 56
Market Context 56
Customer Focus 56
Ipsos MORI methodology and contacts 56
Competitive Dynamics 57
Relevant links 57
Further reading 58
Ask the analyst 58
Datamonitor consulting 58
Disclaimer 58
List of Tables
Table 1: Travel insurance GWP, 2002-6 10
Table 2: Number of visits abroad by UK residents, 2002-6 18
Table 3: UK residents' visits abroad by destination, 2002-6 20
Table 4: UK residents' visits abroad by reason for travel, 2002-6 22
Table 5: Holidays and inclusive tours taken by UK residents, 2002-6 23
Table 6: Holidays and inclusive tours taken by UK residents, by destination, 2002-6 25
Table 7: Travel insurance product penetration by age, 2006 27
Table 8: Annual/single trip policy breakdown for UK travelers with separate travel cover by age, 2006 29
Table 9: Annual/single trip policy for UK traveler with separate travel cover by income bracket, 2006 30
Table 10: Distribution of travel insurance GWP by channel, 2002-6 32
Table 11: Top 10 travel insurers by premium income and market share, 2006 35
Table 12: Travel insurance advertising spend by medium, 2003-6 38
Table 13: Advertising spend by the top 10 largest travel insurance advertisers, 2006 40
Table 14: Scenario One: UK travel insurance GWP, 2002-11f 45
Table 15: Scenario Two: UK travel insurance GWP, 2002-11f 48
Table 16: Number of trips abroad taken by UK residents by quarter, 2002-6p 49
Table 17: Number of trips to North America taken by UK residents, by quarter 2002-6p 50
Table 18: Business travel abroad by UK residents, by destination, 2002-6 50
Table 19: Visits to friends and relatives abroad by UK residents, by destination, 2002-6 50
Table 20: Reason for purchasing travel insurance policy, 2006 51
Table 21: Top 10 UK travel insurers by premium income, 2005-6 51
Table 22: Top 10 travel insurance advertisers by medium, 2005 52
Table 23: Relationships between travel underwriters and major tour operators, 2007 52
Table 24: Relationships between travel underwriters and online travel agents, 2007 53
Table 25: Relationships between travel underwriters and low cost airlines, 2007 53
Table 26: Relationships between travel underwriters and banks and building societies, 2007 54
Table 27: Relationships between travel underwriters and selected brandassurers, 2007 55
List of Figures
Figure 1: The number of trip taken abroad continued to increase above 3 per cent in 2006 4
Figure 2: The travel insurance market experienced slower GWP growth in 2006 than in previous years 10
Figure 3: Insurers' books vary considerable but the average split still favors single trip policies, according to Datamonitor interviews 11
Figure 4: The majority of travel insurance coverage is obtained in the form of single trip insurance policies 12
Figure 5: Medical bills dominated the claims costs for Norwich Union in 2006 13
Figure 6: The Treasury Select Committee has set out three options for the future of travel insurance distribution 14
Figure 7: The number of trip taken abroad continued to increase above 3 per cent in 2006 17
Figure 8: Strong growth in the second quarter of 2006 gave way to marginal movement in the summer months of the third quarter 19
Figure 9: Travel to the Americas and Australia fell in 2006 while trips to all other parts of the world increased 20
Figure 10: Growth in holidays have tapered off in 2006 after strong growth in the preceding years 21
Figure 11: Travel increased in all lines but visits to see friends and family grew the most in 2006 22
Figure 12: Independently arranged holidays have gained in popularity 23
Figure 13: Packaged holidays to North America and Europe are falling as a percentage of total holidays 24
Figure 14: Market penetration is high across all age groups but older consumers display the highest levels of product uptake 26
Figure 15: Ease of obtaining the insurance as well as price are the most often cited reasons for choosing a provider 28
Figure 16: The popularity of annual policies increase as consumers age 29
Figure 17: Affluent consumers are more likely to take out annual travel policies 30
Figure 18: Travel agents and tour operators remain a significant distribution channel for travel insurance 31
Figure 19: AXA remained the market leader in 2006, accounting for one fifth of travel insurance GWP 34
Figure 20: Travel insurance advertising spending declined in 2006 after strong growth in the previous two years 38
Figure 21: The Post Office became the largest travel insurance advertiser in 2006 on the strength of its press campaign 39
Figure 22: Key to the relative importance of forecast variables 42
Figure 23: A number of factors influence travel insurance GWP in Scenario One 43
Figure 24: Travel insurance GWP is forecast to reach a value of £838 million in 2011 brought on by steady growth 44
Figure 25: A number of factors influence travel insurance GWP in Scenario Two 46
Figure 26: FSA regulation is expected to cause GWP to contract in 2009 47
Figure 27: Travel to North America has only slightly increased since 2003 49