The global impact of COVID-19 is undeniable. Many countries are losing income from the tourism market, often a major part of their GDPR, and many travelers are experiencing financial losses they may not recover. These events will change the travel industry landscape in unpredictable ways. As many of us in the travel industry prepare to adapt to these changes, it's important we stay informed of what new obstacles and solutions lie ahead. After all, we will need to hit the ground running when the industry opens its gates and eager travelers seek to bid goodbye to shelter in place restrictions.
As we face a global crisis with major economic impacts, we have to ask ourselves two questions. First, how will the travel industry be impacted in terms of who is willing to travel? Lori Pennington-Gray, director of the Tourism Crisis Management Initiative at the University of Florida, had a conversation with the New York Times and said, “As far as the travel and tourism industry, one of the things that we’ve seen from crises in general is that the industry is very resilient, and that we rebound fairly quickly. We are also seeing that there will be some pent-up demand and that people will be ready to travel. There’s some indication that travel will be closer to home initially and that people will do more driving tourism. But there’s going to be a segment of the population that is more willing to jump on a plane and go overseas.” That’s great news for travel retailers who are feeling the impact of the virus more deeply than many larger conglomerates.
The next question we must ask is how will our relationships with industry vendors and partners change in the wake of the pandemic? In 2002 we saw airlines cut commissions to zero following 9/11, and travel retailers had to adapt to the market in new ways. Many chose to take advantage in the surge of interest in travel insurance. The industry high commissions and quick payouts helped ease the impact of the commission cuts they were experiencing in other sectors. But now we face the reality that a global pandemic might impact coverage from many of our trusted travel insurance products, and it's something we really need to pay attention to.
In an article written by Travelers United, upcoming changes are discussed and a few experts weigh in. Kasara Barto, spokeswoman for Squaremouth says, “Every major event that impacts travel has an effect on the travel insurance industry.” While that does ring true, many times these product changes are unnoticeable to travelers not working within the industry. Coronavirus brings different changes, however, and these changes are anything short of noticeable.
1. Many travel insurers have halted the sale of policies
While TravelSafe continues to offer its plans through B2B and B2C markets, many of our competitors have ceased offering their plans directly to consumers until June 1st, 2020. The reasons for this could be two fold. One, these travel insurers may exclude pandemics from coverage all together, making their policies virtually pointless for those buying plans due to fear of COVID-19. Second, travel insurers might want to avoid the risk of a high loss ratio associated with claims, which would result in an uptick in pricing that may make their products unappealing to travelers in the market in the future.
2. Many travel insurers are putting additional exclusions in their plans for future pandemics like COVID-19
Sometimes, events like the COVID-19 pandemic cause travel insurance companies’ claims ratios to sky-rocket. These costs do not always get recuperated, and in order to keep premiums from rising, underwriters find it necessary to exclude events like these that put them at too much of a risk.
3. For some insurers, Cancel for Any Reason is getting new restrictions or disappearing.
TravelSafe Insurance introduced the Cancel for Any Reason (CFAR) benefit into the market in 2007, and we feel confident in saying we do not foresee any changes to its structure in the near future. With that being said, CFAR can be risky for many travel insurance brands. Events like a global pandemic can be the cause of increased loss ratios, putting insurance companies in a difficult position where they must ask: "Do the gains of offering this travel protection benefit outweigh the risks?"
Many of these companies have decided it is best for them to alter the structure of Cancel for Any Reason or remove it all together. Lucky for us, we won’t be jumping on board with that trend.
Travelers have really come to understand the value of travel insurance more now than ever before, and it isn't the first time we've seen a change like this in the market. After the tragedy of of 9/11 the travel industry saw a major jump in travel insurance sales, causing a massive shift in the industry. Travel insurers adapted their plans to meet the new needs of travelers, like introducing domestic terrorism as a covered reason for trip cancellation. We plan to see more industry-wide adaptations following this current crisis, but TravelSafe is aiming to make positive changes to our plans that help travelers and travel professionals alike feel confident in their purchase, no matter the risks they may face.
Want to get a more detailed look at how TravelSafe plans can still work for your agency in the midst of COVID-19? Book a strategy session below!
