Life's no beach

This is the year of the 'staycation'. People are more likely to stay at home than travel abroad because of the recession, which is bad news for the travel insurance industry and insurance brokers alike. However, both sectors are resilient and refuse to be beaten down: in fact, because many are niche players they are bearing up better than expected and you would be hard pushed to find another group of specialists that are so innovative and committed to customer service.

Meanwhile, roll on economic recovery and let us hope also for better public understanding of an undervalued, negatively perceived sector; if ever there was a pile-it-high-and-sell-it-cheap insurance product then it has to be travel. Tesco, for example, advertises cover from £6, while it can be bought online from many websites and is also offered 'free' with so-called packaged bank accounts. Analyst Defaqto says that, for single-trip cover, there are almost 275 polices available from 159 distributors in addition to a further 56 white-label plans and 40 separate insurers in the sector.

Cheap prices belittle a product that is complex and can result in high claims payouts. Swine flu is the latest expensive headache to hit the market and there is further industry gloom: more people are likely to buy cheap, single-trip polices rather than annual ones according to Defaqto. Beyond this, Saga Travel Insurance recently pointed out that one in 10 travellers is shunning cover and instead relying on the European Health Insurance Card - even though many may not realise this offers only limited protection.

In its Travel Insurance 2009 report, Defaqto said that travel is a sector caught up in a 'vicious price war' and, in terms of premium income, it is a poor relation to motor and household. The travel market is worth around £700m according to the analyst's estimates - a figure that is dropping in this still-worsening economy.

Outwardly, it seems as if travel holds little interest for brokers, though it is debatable whether or not this should be the case. The British Insurance Brokers' Association's technical and corporate affairs executive, Graeme Trudgill, comments: "Ruling out travel is not a sensible option. If a broker tells a client they don't offer the cover, they are just sending them to a direct writer. For standard cases, brokers should provide a quote-and-buy facility which, for our scheme, has no minimum levels of business required but does mean they can offer an inclusive service and protect their business."

Representation

Unfortunately, not everyone can buy cover online without hassle. Biba has also been campaigning hard on behalf of older consumers and those with pre-existing health conditions and is championing a 'signposting solution' within the forthcoming Equality Bill.

As part of the Bill, the government has released a consultation paper showing three options on how insurance can be exempted while allowing for a better customer experience.

• Strict implementation of the ban on age discrimination with objective justification.

• A tailored exemption allowing for age to be used provided that it is proportionate to risk and costs, allowing the use of age bands and limits along with a signposting service.

• Allowing current practices to continue.

The government has stated that its preference is the second option - the one that Biba played an active role in drafting. Trudgill says: "There are thousands of people, in particular those over 75, who find it really hard to buy insurance and are just being turned away. Likewise, we take many calls from those with health problems that have been rejected. There are specialist brokers in this market - InsureCancer springs to mind - that can help in more complex cases and we think passing on such details should be straightforward, whichever company the customer first calls."

Defaqto has also identified this problem and said in its report that insurers should, both individually and collectively, do more to assist customers with medical conditions find cover. It suggests that a register be built, possibly through the Association of British Insurers, which would supply details of those able to help.

InsureCancer's director, Dr Krish Shastri, says that he fully supports improved signposting. He comments: "I'm keen to spread the message in the broking and insurer community that we can and do help most cancer patients, even those with active disease, on chemotherapy or perhaps with a terminal prognosis. This is an area commonly thought to be uninsurable."

He explains that going away may be hugely important to the individual and to be rejected by insurers can cause distress. "Someone may be facing the inevitable. They may want to visit family or perhaps get married. Or maybe visit Disneyland. We have developed a pioneering insurance risk assessment and underwriting methodology that enables insurance provision for individuals on active treatment for cancer, including chemotherapy and radiotherapy. This [scheme] is responsive to all cancers and enables risk assessment by each treatment stage of the different treatment protocols."

As an extreme example, he says that one customer was quoted £42,000 by a non-specialist insurer for wanting to travel to the US, whereas InsureCancer quoted £700 - which was taken up. What is more, the business has been profitable for the past seven years since it was founded.

Shastri continues: "Given our ability to help most cancer patients, it would be a small matter for brokers and insurers to signpost cancer patients at the point of decline. This would be within the spirit of current legislation and has the added benefit of reinforcing brand values; it takes the sting out a decline for the customer at the same time." There are several brokers listed already on the Macmillan cancer support website.

From the amount of emails that he receives from overseas patients, Shastri says it is clear that cancer patients worldwide struggle to obtain cover. "We do have long-range plans to respond to the large number of enquiries we receive from Australia, the US and Scandinavia but implementation would depend on locating a like-minded partner with capital," he comments.

Regulator

Across the UK, customers should theoretically expect to receive more informed travel insurance service because the sector fell under the Financial Services Authority's regulatory remit in January 2009. The move meant that travel agents and tour operators needed to either stop selling travel insurance or become the introducers or appointed representatives of a regulated provider.

The question remains to be answered if the changes in sales practice will mean that more people fail to buy cover altogether, however it has also created opportunities for brokers to provide cover through links with travel agents.

Specialist broker Voyager Insurance Services has already created such an arrangement for winter sports and safaris and can also provide cover for anyone escorting tours. Director Jonathan Buttery comments: "We work with appointed representatives - there is no doubt that regulation has hit the travel industry: where it chooses to sell cover will add to costs. I support the idea of raising standards but you also need consumer education if there are changes and it seems that more may now be travelling without cover."

Voyager has several niche divisions including: a quote-and-buy wholesale system for brokers; long-stay travel cover aimed at groups such as backpackers; older people spending several months abroad; and winter sports. The company also owns a business aimed at those with pre-existing conditions, Able2Travel. Buttery comments: "We also support better signposting and the fact that there are now a number of brokers able to assist those with conditions means that cover may be surprisingly affordable."

However, he emphasises that the industry's focus on low cost has brought it no favours: "We never set out to be the cheapest and I think brokers that recommend a better quality product do their clients a favour. There is no doubt that the cheapest policies are tightly adjusted - and damage the industry's reputation. Brokers should talk about claims and the quality of the assistance service as well as how the cover works. Medical and cancellation are often the most important areas."

Despite the tough trading conditions, specialist broker PJ Hayman is maintaining its team of around 40 staff. Managing director Peter Hayman says that the company is placing more emphasis on marketing and "being as visible as possible", to which end it has also recently engaged public relations agency Wriglesworth to promote the company in national and consumer media.

He explains that the company is poised to launch a travel scheme in a new area - cover for those having treatment overseas: "It will be applicable to those having cosmetic, dentistry and some elective procedures. It will be unlike other policies in that we will also include cover for complications."

The broker also has a pre-existing conditions division - Free Spirit - and Hayman says that, reflecting on 15 years' experience in underwriting in the sector and medical advances over that same period, rates have come down: "In some cases, people can buy online. Providing people know there is specialist cover available, it has become a lot easier."

Experience

He adds that although this can be profitable business, some have had their fingers burnt: "Insurers have pulled out. You can receive some very big claims and the costs can be hard to manage. Everyone knows about the potential costs of US medical bills but treatment in private clinics in Spain, Greece and Turkey, for example, can also be extremely expensive. You need a lot of experience; this isn't an area to dabble in."

PJ Hayman works with affinity groups including charity Age Concern and has agencies with 1,400 brokers offering quote-and-buy scheme facilities. Hayman comments: "We don't have minimum sums insured and it is not always small ticket. I would agree that not being able to offer a high-quality travel product is a risky strategy. If an important commercial client has a son or daughter who is going backpacking, for example, does it make sense to send them elsewhere?"

For brokers that are not travel specialists, there are wholesale brokers around to provide good support in areas from providing technology to claims assistance. PJ Hayman, for example, has also recently provided guidance on swine flu on its website.

Despite the sector's depression, Phil Denman, managing director at Healix Insurance Services, says that there is plenty of optimism for the market's prospects: "In challenging economic times such as these, the travel insurance market feels it more than most with falling traveller numbers, exchange rate movements in key currencies and claims pressure from financially challenged clients. Add to this the spectre of a full-blown flu pandemic and you might expect the travel insurance fraternity to be reaching for the Prozac. It's not happening - not a bit of it."

Healix provides wholesale policies, medical risk assessment tools, helplines and case management. Denman describes travel brokers as a hardy breed and adds: "Intermediaries are succeeding with innovative new products and operating platforms that meet the challenges of the modern market. From an aggregator perspective, it is the brokers that lead the tables because it is they that are able to deliver and evolve products at the pace the comparison sites and web punters demand."

Although standard travel cover is being sold cheaply, Denman highlights that niche intermediary products are "generating excellent commission levels". Healix has technology that allows some medical underwriting and allows more specialist cases to be covered. "This enhanced policy sale can move the transaction value up to a level at which commissions begin to rival a household or motor product. Moreover, covering a client's heart condition for that dream cruise will transform them from a transient, promiscuous customer to a loyal and appreciative client," he comments.

Travel cover is not going to float every broker's boat but a high-quality online product for standard customers and knowing where to find specialists to refer to when required will keep customers satisfied - and ultimately that is what every broker should strive for.