Demand for travel insurance in the United States is set to jump this year, as more Americans turn cautious after a spike in flight cancellations and lost luggage in the last two months upended holiday plans of tens of thousands across the country.
Cancellations jumped 73% to 210,503 flights in 2022 from a year earlier, as per flight tracking website FlightAware, largely due to adverse weather and network outage.
Led by Southwest Airlines LUV.N, the nation’s carriers including American Airlines and Delta Airlines canceled hundreds of flights during the December-January period.
Reflecting the nervousness, sales of travel insurance policies jumped 16% in the two-week period between Dec. 26 and Jan. 8, from the previous two weeks, according to data from policy comparison website Squaremouth.
Policy sales soared 81% in 2022 from a year earlier, the company said, and were up 449% from 2020.
“We expect demand for travel insurance could increase by another 30% this year,” Squaremouth’s Marketing Manager Steven Benna said.
A travel insurance typically covers claims made for baggage loss, flight cancellations, loss of passport, bounced hotel bookings among others.
Emergency medical cover and trip cancellation were the top reasons to buy a travel insurance, as per a survey of 500 U.S.-based travelers by World Nomads, which insures independent travelers from more than 130 countries.
The firm saw a 56% increase in policy sales from December 2022 to January 2023, compared with the same period a year ago.
The rise in appetite for travel insurance may also send premiums higher in 2023, pushing insurers to tweak coverage or increase the bar for claiming insurance, according to an insurance broker and executive of a travel risk firm.
“It wouldn’t surprise me if it (premium) exceeded the rate of inflation across the board,” Dan Richards, chief executive for travel risk and crisis management firm Global Rescue told Reuters.
The average cost of a travel insurance policy was $278 in 2022, up $33 from the previous year, according to brokerage Insuremytrip.
Rather than increasing rates, travel insurance providers may look at adjusting certain benefits or coverage requirements, said Suzanne Morrow, the company’s senior vice president.
“For example, if a plan has a travel delay benefit that kicks in after three hours, they may increase the delay requirement to six hours.”
Travel insurance companies have now pinned their hopes on buoyant demand following upbeat forecasts from major U.S. carriers to help recover losses from the large amount of claims received.
“There are also more traveler concerns than ever before, so that does lead to more people buying travelinsurance,” Squaremouth’s Benna said, while cautioning that there may also be an increase in claims.
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