Australians are saying bon voyage in droves, and giving insurers plenty to smile about

By Miranda Maxwell

Travel is increasingly considered a must-have rather than a luxury – a “generational shift” in mindset that is spurring a remarkable resurgence in demand for travel insurance.

Under-40s may be cutting back on their infamous avocado toast and almond milk iced lattes, but industry experts say travel ranks high in household budgets as Australians prioritise getaways despite cost-of-living pressures.

“Millennials appear unwilling to forgo travel,” says Southern Cross Travel Insurance, which found 17% of 28- to 43-year-olds it surveyed made travel their top discretionary spending priority, compared with just 4-6% among other generations.

At Allianz Partners, Global Head of Product Management and Innovation Travel Joe Mason agrees heading overseas has ascended the consumer spending pyramid.

“They’re prioritising it. Among all their expenses, travel continues to outrank other types of purchases,” he tells Insurance News. “People aren’t treating travel necessarily as a discretionary expense any more.”

Australia’s travel insurance industry made a record $102 million underwriting profit last year, according to consultant Finity, which forecasts “another similarly profitable year in fiscal 2024, with record gross written premium (GWP) providing a strong tailwind for the class”.

This year will be defined by mass tourism events – including the Paris Olympics in July and the rest of Taylor Swift’s The Eras Tour – and sustained demand from the leisure sector.

Taylor Swift fans travelled from far and wide to see the star’s recent sellout tour in Australia

Air New Zealand added more than 2000 seats from Wellington, Christchurch and Auckland to Melbourne and Sydney to meet demand for Swift’s sellout tour, and Cover-More Interim Chief Executive Justin Sebire says there is “no doubt” domestic travel and accommodation are significantly affected by such major events.

“In Australia, travel insurance sales across all our channels are very strong,” Mr Sebire tells Insurance News. “We are continuing to see growth in demand for cover for adventure activities such as black water kayaking and ice climbing, which are among the add-on boosts to our international comprehensive policies in Australia.”

The team at Sydney-based Cover-More, owned by Zurich, expects travel insurance sales to show strong growth this year across all age groups.

It follows a record year for sales across its operations in Australia and New Zealand, North America, Europe and Latin America last year.

“We are still seeing stronger travel insurance attachment rates than at any point before the pandemic,” Mr Sebire says. “Consumers are prioritising travel over other spending.

“It’s a generational shift: we are seeing it in Australia as Gen Zs enter the workforce and Millennials are earning more. It’s a global phenomenon and 2024 should be another positive year for travel.”

In a sign the covid slump is truly behind the industry, 2024 marks the first time since 2020 that travel performance can be meaningfully benchmarked year on year, rather than against pre-pandemic 2019.

Finity estimates aggregate travel insurance volumes will be up 25% in the year to June, bringing back-to-back record years for written premium.

It forecasts GWP of $2 billion at Australian Prudential Regulation Authority-authorised insurers this financial year, up from $1.5 billion in 2023, plus an estimated Lloyd’s GWP of $150 million. The sum eclipses the 2019 figure of $1.2 billion.

Earned premium – which plunged 80% from the peak of 2019 to the trough of 2021 – surged in the year to June, helped by recovering travel volumes and premium increases of 25-30%, which covered increased claim costs from covid coverage.

The fiscal 2023 combined operating ratio of 92% was a significant improvement on 107% a year earlier, and the expense ratio of 45% was the lowest since 2017.

Finity says average premium growth is likely to continue, but greater competition will stop further significant price increases. The consulting firm expects Australian travel insurance loss ratios will stay at about 45-50%.

Among consumers, adventure travel and remote locations are a current trend.

Battleface Chief Executive Sasha Gainullin says travellers are booking unique trips and destinations, and also going for longer periods because they can travel and work remotely at the same time.

“We’re seeing longer travel time frames as a result of that and now travellers are expecting to be able to buy insurance while they’re travelling as well because their plans are changing,” the US-based executive told Insurance News while on a trip to Australia in March.

The Asia-Pacific region is expected to be a focus for travellers this year as pent-up demand for visiting Europe eases. There has been an increase in travel to Japan, partly due to its relative affordability compared with the US and most of Europe.

Southern Cross Travel Insurance says its number of policies sold in a year for travel to Japan are up 44% on 2019, and the country is now the seventh most popular destination among Australian travellers, ahead of the US and New Zealand. The top six are Indonesia, Britain, Italy, Thailand, France and Singapore.

Southern Cross’ average cost of claims paid in the year to October 31 was $1245, with 34% for medical reasons, 30% for mislaid or delayed property and baggage, and 19% for unexpected changes to customers’ travel plans.

It paid out more than $220,000 in claims to Australians travelling to Japan, with the most expensive being $18,000 to a customer hospitalised with pneumonia and $17,000 to a customer who slipped on ice and broke an ankle. Another was paid $12,000 for repatriation to Australia and medical support for a back injury after being hit by a snowboarder.

“Intent to spend on travel … remains significantly higher than most other major spending categories.”

Ski cover is sought by Australians who are demanding flexibility and a high degree of customisation in their travel insurance, particularly for snow sports in Japan.

“This is highly likely to continue throughout 2024,” Cover-More’s Mr Sebire says. “We’ve seen a dip in the popularity of the US, most likely due to cost-of-living pressures and the value of the Aussie dollar against the US dollar.”

Airline Qantas has noted strong demand across its portfolio and is forecasting a six-month 27% jump in international available seat kilometres (a measure of carrying capacity), excluding Jetstar Asia, where it says the same metric will surge 48%.

“Intent to spend on travel … remains significantly higher than most other major spending categories,” Qantas said in late February.

“Travel demand remains strong across all sectors, with leisure continuing to lead and business travel now approaching pre-covid levels.”

At trip aggregator Expedia’s recent results day, Chief Executive Peter Kern predicted the “revenge” travel that picked up after periods of enforced covid isolation will start to ease a little. Travel demand will “remain relatively healthy but we expect growth rates across the world to decelerate, especially early in the year”, he says.

“We anticipate that market growth rates will moderate in 2024 given the absence of covid-driven tailwinds that were prominent last year.”

Insurer Nib Travel moved from a 2021 operating loss of $14 million to a 2023 profit of $14 million as gross written premium jumped 132% to a record $224.1 million. The travel insurance market “has remained robust”, it says.

The latest buzz phrase in the sector is “affordable luxury”, balancing budget constraints and high-end cravings – for example, by travelling outside school holidays or using buy now pay later arrangements. Insurers are advised to offer different payment options and tiered policy choices and add-on covers to manage the cost of protection.

To this end, insurers are increasingly introducing new services beyond basic cover.

Battleface has launched Robin Assist, a suite of services including claims and 24/7 responsive customer service, emergency travel and medical assistance, with a multilingual team who can help arrange emergency medical evacuation or make travel arrangements, locate lost luggage and find lawyers, interpreters or doctors worldwide.

Irish insurtech Blink Parametric has partnered with Zurich to offer delayed passengers instant electronic passes to almost 900 airport lounges globally.

Cover-More says its app is the first of its kind delivering corporate-level travel assistance to Australians, with 80,000 downloads. Its Freely app donates 1% of sales to pressing environmental issues, and its in-house 24/7 medical assistance and travel risk management service is a differentiating feature.

Customers can access counselling for anxiety, depression, loneliness, trauma and cultural shock, and can select a virtual care telemedicine service.

When Turkey and Syria were devasted by earthquakes in February 2023, Cover-More’s assistance team identified five policyholders through its app and made contact.

Mr Sebire expects new approaches will emerge this year to target the underserved small business segment that prioritises travel risk management and proactive care.

This may go some way to addressing the fact corporate travel lags the leisure segment’s growth rate, he says.

He recommends travellers choose insurers with in-house assistance teams. “It’s an extra way to stay away from trouble and connected to help. We invest in this capability because travellers are demanding more connected, more informed and safer travel.”

Hunter