The covid emergency scarred travel insurance, but it’s bouncing back with products that deal with a changed world

By Claire Heaney

The travel insurance industry is slowly rebounding as Australians dust off their passports after unprecedented travel restrictions for more than two years.

Australian Bureau of Statistics figures show by December 2022, short-term resident returns reached around 71% of pre-lockdown levels for the corresponding time in 2019.

Business travel is slower as companies see the cost and time savings of using online technologies they resorted to during lengthy lockdowns.

New Zealand, aided by the Trans-Tasman bubble, was the most desired destination for Australians after having their travel plans clipped by Covid-19 in early 2020, but as the world returned to “normal” travellers spread their wings.

Finity Travel Insurance Practice Leader Danielle Casamento tells Insurance News the level of premium written for travel insurance rebounded in the first quarter of FY23 to above pre-covid levels.

“The industry had a tough few years because it still had fixed costs,” she says. “We saw some changes in the market with some brands withdrawing. There is renewed confidence and a growing appetite to write travel insurance again and offer it to customers.”

Ms Casamento says despite the “bad rap” travel insurance gets, particularly through the pandemic, customer demand is high.

In October last year Finity’s state of the industry Optima report painted a mixed picture for travel insurance. Challenges, including regulatory change sparked by the Hayne royal commission, Covid-19 disruptions and natural disasters, led to low volumes. And while a bounce back was expected returns would be low, it said.

Allianz Partners Australia Executive Head of Travel Damien Arthur says the pandemic changed customer behaviour, with travellers appreciating the value of what is a product some buy grudgingly.

“From our perspective we have always known the value of travel insurance. Our Medical Assistance Desk has decades of experience providing assistance to customers in the worst moment of their life. Sometimes, unfortunately, if they don’t have the appropriate level of cover or travel without insurance at all, it can be the costliest,” Mr Arthur says.

“Over the past 12 months since the borders opened, we’ve seen the highest rates of lost luggage and cancelled flights, and the chaos at airports was widely publicised. So rather than consumers doubting they’ll get an exotic illness, or have a serious accident, they are much more aware that travel mishaps can happen to anyone.”

Southern Cross Travel Chief Executive Jo McCauley says their research shows 87% of Australians planned to travel in the next year.

“We’re not seeing the same level of travel as our 2019 volumes yet but we’re certainly seeing the numbers steadily creep up each month, which is something that we anticipate will continue as airline recovery grows and overseas carriers continue to return,” she said.

Altered landscape: Southern Cross Chief Executive Jo McCauley says claim costs have increased

Fast Cover Travel does not expect “normal pre-covid conditions” to resume until mid-2024. It says travel insurance entry requirements for some countries over the past 12 months contributed to the higher uptake, but gross written premium remains unpredictable.

In 2022, Fast Cover experienced a higher than usual demand for Fiji and Bali because travellers sought easily organised, close-to-home holidays.

The Australian Financial Complaints Authority says claim disputes peaked in the 2020 calendar year as covid hit, up 182% from 2019.

In 2019, before covid, 1569 travel complaints accounted for 9% of the 16,848 general insurance complaints. Travel was the third most complained about product.

By the end of 2020, travel insurance accounted for 23%, or 4431 of 19,562 general insurance complaints. Of these, 3382 were in relation to covid and cancelled travel, making travel insurance the most complained-about insurance product.

By 2021, 4% or 605 complaints were about travel insurance, with 363 of these complaints related to covid.

Last year, travel insurance accounted for 1066, or 5% of the total general insurance complaints with 141 related to covid. Travel insurance was the fifth most complained-about product.

As of February 21, there have been 275 (7% of 3633 general insurance complaints) with 10 complaints related to covid.

“To travel insurers’ credit, the vast majority of covid-related complaints – more than 80% of those that reached us – were resolved by agreement early in our process, without an ombudsman having to make a formal decision,” AFCA Lead Ombudsman Insurance Emma Curtis says. “Insurers stepped up at a time of need, working with us to achieve fair and efficient outcomes.”

AFCA says disputes about the size, handling and denial of claims are ongoing.

While there are fewer covid-related claims, issues around cover for testing positive for covid while overseas remain. Fast Cover says covid claims were a “top three” claimed benefit in 2022, but it is experiencing a sharp decline in such claims.

Southern Cross Travel Insurance says it has paid out more than $1.4 million in covid travel claims since December 2021, when Australia’s borders opened, and they made up 20% of claims to the end of 2022.

Ms Casamento says premiums for international travel insurance have increased by more than 50% on average compared to pre-pandemic levels.

Allianz’s Damien Arthur says more expensive premiums reflect broader coverage around covid and rising costs of medical assistance.

The differences mean premiums pre-covid can’t be compared like for like with current offerings.

Fast Cover says its premiums have risen due to, but not limited to, the introduction of two new covid benefits which have had significant claim rates – as well as airline delays, labour shortages and spiralling medical and travel costs due to global inflation.

Southern Cross says costs associated with booking a holiday are more expensive, which is reflected in an increase in average claims costs.

Pricing the risk: covid accounts for 30-40% of the risk cost, says Cover-More’s Todd Nelson

“The average claim cost between November 2022 and January 2023 was 27% higher than the average during the same period between November 2019 and January 2020,” Ms McCauley says. “Like many travel insurers, we have had to respond to the market by adjusting our premiums. However, we still believe we’re extremely competitive and offer products that provide fantastic value.”

Cover-More Australia Managing Director Todd Nelson agrees the industry’s recovery has been affected by increased trip and claim costs, although on a volume basis they expect further growth, aided by bigger flight capacity.

“We are currently dealing with an elevated level of claims, mainly due to the increased number of people travelling and purchasing travel insurance,” he says.


“In January 2023, less than 10% of claims related to Covid-19 compared to more than 50% at the same time in 2022. We are seeing an increase in travel delay and luggage claims due to the problems we saw with some flights and airport baggage handling in late 2022.

“The cost of covid coverage (that was previously excluded from most policies through pandemic exclusions) makes up a material 30-40% of the overall risk cost.”

He says one example of cost pressures is business class flights to Europe, which are hovering around $15,000, up from $8000 pre-covid.

Mr Nelson says gross written premium recovery has been “impacted by increased trip and claim costs, although on a volume basis we continue to expect further growth, aided by increasing flight capacity”.

Fast Cover Travel says gross written premium remains unpredictable compared to pre-covid levels.

As the world has returned to “covid normal”, insurers are offering varying levels of pandemic coverage, reversing blanket exclusions imposed as the severity of Covid-19 was realised and borders closed.

Allianz’s Damien Arthur says his company has a competitive offering in the market but he cautions people to read the Product Disclosure Statement before buying.

“At the beginning of the pandemic, the sheer volume of cancelled travel plans significantly increased claim volumes and so, in turn, disputes also increased,” he said.

“There is also a direct correlation with the change in customer behaviour. Customers are more engaged with what value their insurance provides, so if it doesn’t meet their expectations they are within their rights to dispute it.”

Southern Cross Travel Insurance’s Ms McCauley says anyone choosing insurance based on the covid cover benefits should carefully read the terms, conditions and any exclusions.

“We offer what we believe to be straightforward and transparent cover for medical expenses, cancellations if you test positive for covid before you leave, and changes to your journey if you test positive overseas and need to alter your trip. Of course, there are limits in place, but we have tried not to over-complicate our product.”

Cover-More Australia’s Mr Nelson lays claim to being the “the first travel insurance company in Australia to introduce previously unavailable cover for Covid-19 in December”.

Cover-More was also set to introduce new Covid-19 cover in March, offering “optimal cover at the right price”.

Fast Cover options include a product offering unlimited Covid-19 cover overseas, emergency, medical, hospital, evacuation and repatriation costs and another offering up to $5000 for Covid-19 trip cancellation and disruption.

Tech trailblazers

Cover-More Travel is a tech pioneer with an app offering proactive travel advice, risk rating, real time safety advice based on geo-location including Covid-19 restrictions, transport disruptions and terrorist incidents. Users can click to call emergency assistance worldwide.

“Both apps represent the first step in a significant new customer proposition in leisure travel which fundamentally is about safer travel,” Cover-More Managing Director Todd Nelson said.             

Southern Cross Travel says pre-pandemic customers were unable to complete simple tasks like cancelling a policy or submitting and tracking a claim.

“Now they can, and ongoing self-service development is a focus area for our team,” Southern Cross Chief Executive Officer Jo McCauley said.

It has introduced the Scout chatbox, assisting travellers with straightforward queries.

Allianz’s Damian Arthur says there is a move towards self-service and he predicts the trend will continue across the customer journey.