How Travel Insurance Has Changed

Group travel and travel insurance go hand-in-hand, now more than ever! While the urge to travel is booming, travelers still have some apprehension about their travel investment. In response, tour operators should encourage all customers to consider purchasing travel insurance.

During the pandemic, tour operators returned money to their clients when trips could not operate, and in turn, sought refunds from their suppliers, impacting the entire travel value chain. Travel businesses were ground to a halt, forcing operators to rethink their risk management strategies to avoid future no-fault refunds. For many, the solution was to proactively provide a travel insurance offering to the traveler alongside the trip purchase.

Practice pointer: When booking group travel, operators normally interact with trip organizers—not necessarily every individual in the group. Regardless of the organizer's personal opinion on the appropriateness of travel protection plans, operators should insist it be made available to the trip participants.

According to a recent NerdWallet survey, only 20% of U.S. travelers protected the value of their leisure trips with travel insurance pre-COVID. The same survey reported 45% of U.S.-based travelers were likely to purchase travel insurance post-pandemic. With more restrictive terms and conditions limiting traveler refunds and tour operators more aggressively encouraging (and in some cases mandating) that clients purchase travel insurance, it's no surprise the number of travelers interested in travel insurance more than doubled from pre-pandemic levels.

A word to the wise: Be careful about describing coverages available or the amount that may or may not be paid on a claim. This can be difficult since the traveler is relying on your advice. Like your professional liability insurance, all travel insurance policies have exclusions and claim limitations. These exclusions, which have all been approved by state insurance regulators, can be challenging to understand so it's best to refer the customer to the travel insurance provider. It's also important for operators to investigate which travel insurance provider it chooses to partner with. Decisions shouldn't be made based on commission percentages. Rather, operators should try to partner with a company that offers the broadest coverage with the least number of exclusions.

New operator risk management strategies are just part of the story though, as travelers themselves lost billions due to COVID cancellations and country closures. Forbes estimates half of Americans lost between $500 and $1,500 in 2021 because of canceled trips—$75 billion on the low end. Losses of this scale made travelers more aware of all the benefits of travel insurance and made them more willing to spend above the value of their trip to protect the value of their investment.

While travel insurance companies have seen premium increases because of motivations grown from operator and traveler losses, the most significant change in the travel insurance purchase rate is due to travel insurance companies liberalizing policies to cover COVID. These changes provide coverage for cancellation and interruption if a traveler or travel companion becomes ill with COVID and cannot travel or is forced to interrupt their trip. The presence of this new coverage has provided many previously timid consumers with the confidence to book travel. This increased demand has also enabled many operators to get back to (and in some cases exceed) pre-COVID revenue levels.

Despite the strong urge to sell, recommend and purchase travel insurance, for some group travel it may not be necessary. Factors to consider and understand when declining travel protection include the cost of the trip, how liberal the refund policy is and whether or not some of the coverages might be provided by other sources (i.e. health insurance plans may cover medical expenses incurred in the U.S.). When faced with a group declining insurance, it's important to obtain a written declination of insurance, in turn providing you with protection should the group try to later blame the operator when the unexpected impacts the trip.

In conclusion, there's no doubt that we will continue to see an uptick in the purchase of travel insurance while the pandemic continues to languish. It will be interesting to revisit this issue in five years to see how the industry has shifted, if at all.

Jeff Ment is Managing Partner of Ment Law Group and has decades of experience in counseling travel companies, from operators to vendors and trade associations.

Ted Muhlner is Co-President of Redpoint Travel Protection, a provider of travel protection solutions including medical and security evacuation and assistance services to travel organizations, corporations, academic institutions, and consumers.

This article originally appeared in the Mar/Apr '23 issue of Groups Today.