Rising travel insurance costs pose challenges for UK insurers

Simon Hoskin, director of travel/A&H, Gallagher Bassett.

Travel insurance costs in the UK have been steadily rising, presenting challenges for both insurers and travellers. Several factors have contributed to this surge, including medical cost inflation, repatriation struggles, increased fraud and the UK cost of living crisis. These combined pressures have pushed premiums higher, leaving travellers with a greater financial burden.

Medical costs are escalating

One of the primary reasons for the rise in travel insurance claims costs is the escalating medical expenses in certain countries. Popular tourist destinations such as the United States, Mexico, and South America have witnessed significant medical cost inflation. The advancing healthcare systems in these countries, coupled with the high cost of medical treatments and procedures, have contributed to the surge in claims costs.

Alongside the international issues, we have a health care system under pressure which cannot respond quickly to insurance requests. This is resulting in a sharp increase of customers “paying and claiming” for their medical treatment. This is not only a bad customer journey, it also removes any ability to cost contain medical bills, which is pushing claims cost higher. Customer signposting and support needs to increase to combat this urgently.

Repatriation issues

Another challenge faced by insurers is the limited capacity of commercial airlines for repatriation purposes. When travellers fall seriously ill or sustain severe injuries abroad, they often require medical repatriation to their home country. However, due to reduced flight schedules and limited availability, repatriation becomes more difficult and expensive, leading to higher claims costs. Air ambulance only options are becoming more frequent due to the urgency and lack of commercial airline options.

International travel is now easier than ever, meaning a wider demographic can now visit exotic destinations which before were unrealistic. As a result of this, we’re seeing medical claims in these exotic destinations which can have limited medical facilities or require evacuation to neighbouring countries for care. This alone is a costly element and compounds the medical inflation further.

Claims fraud persists

It is also worth noting that claims fraud has become a growing concern in the travel insurance industry. Fraudulent claims, including exaggerated injuries or illnesses, fake documents, and staged accidents, have contributed to the rise in claims costs. Insurers are investing significant resources in combating fraud, but the increasing sophistication of fraudulent activities poses a significant challenge. Fraudsters can now manipulate documents such as medical reports, receipts, and travel itineraries, making it increasingly difficult to detect fraudulent claims.

To combat this rising threat, the travel insurance industry must adopt advanced technology to detect and prevent fraud at an early stage. The use of AI-powered algorithms can analyse claims data, identify patterns, and flag suspicious activities for further investigation. By leveraging technology, insurers can detect anomalies in documents and photos, helping to identify potential fraud before it is paid out.

Overall, we are seeing costs increase in many areas with some being totally out of our control. As inflation calms and further technology is implemented, we should be able to stabilise the situation.

Image: Provided by Gallagher Bassett.

Guest Post This post was created just for Claims Media by a guest contributor.