Travelers’ Insurance Grows in Both Popularity and Price This Year
By Yehudit Garmaise
While the demand for worldwide travel is surging post-pandemic, continuing Covid-related strains on the airlines industry worldwide will likely cause the travel insurance industry to raise prices 20% to 30% in the short term, said Marcos Alvarez, the head of insurance at credit-rating firm DBRS Morningstar.
Travelers of all ages have been buying more travelers’ insurance amidst widespread flight cancellations and disruptions, the Wall Street Journal reported.
Travel insurance providers, however, have had their own strains, such as having to expand their coverage to include pricey financial protections against epidemics and pandemics, which were previously excluded.
Also, an exodus of airline workers who have left their jobs of late has further overwhelmed the travel industry.
While summer is traditionally a time of heavy travel, airline staffing shortages are one reason that many airlines have had to cut back on flights in recent months.
That lack of flights is doubling the claims costs airlines must pay to get their customers on needed flights, which are still cancelled or interrupted 25% of the time because of issues related to Covid-19, said Daniel Durazo, a spokesman for Allianz Partners, a unit of the insurer.
Inflation, of course, which plagues all consumers and industries, has also caused airfares to rise sharply this year, as carriers try to compensate for higher energy costs and employees’ wage increases.
While travelers are aggravated by tickets in both coach and business-class that now cost two and three times what they cost before and during the pandemic, higher fares also hurt insurers who must reimburse customers for canceled flights.
As a result, travel insurance will likely be an unprofitable business line for most providers this year, said Marcos Alvarez, head of insurance at credit-rating firm DBRS Morningstar.
Some insurance companies might end up charging extra for coverage that reimburses for trip interruptions and cancellations.