This was published 1 year ago
Travel insurance for COVID-19, flight cancellations and delays: Premiums soar amid travel disruptions
Ally Malpass found travel insurance too expensive for a trip to Tasmania, but flight cancellations resulted in her being stranded in Hobart.Credit: Oscar Colman
Flight cancellations, lost baggage, COVID-19 and a host of other travel disruptions are causing travel insurance claims to soar, sending insurance premiums and excess costs through the roof.
Australian travellers at the older and younger ends of the spectrum are bearing the brunt of these financial headwinds.
Older Australians are now finding it difficult – or horrendously expensive – to afford insurance, with already-high premiums being increased.
And despite early data revealing younger Australians are showing greater intent to buy travel insurance than ever before, factors like rising inflation and more expensive policies are proving a major barrier.
For 55-year-old Vanessa Fielden, who divides her time between Melbourne and Bali, finding insurance that included unlimited medical and repatriation cover was non-negotiable.
"My policy includes being flown to Singapore if necessary," said the health practitioner, who sourced a comprehensive policy for a discounted rate through her car insurer.
However, Fielden still has concerns about the affordability of cover into the future as COVID-19 continues to drive up premiums. "After turning 60, I guess we'll have to see what's happening in the world then, and what the costs are."
Ally Malpass, 30, didn't take out travel insurance for a recent trip to Tasmania with her boyfriend. The move cost the couple almost $1000 after a series of flight cancellations left them stranded in Hobart.
"I had looked into domestic travel insurance and it was super expensive for minimal coverage. The excess for car hire alone was over $1000," said the Sydney-based artistic director. "I ended up not going with it, which I regret," she said.
Malpass said that travel insurance rarely factored into her trip planning prior to the pandemic, but certainly does now.
"If I was travelling anywhere overseas, especially America, the fear of not being able to get back home if I got COVID, or having to fork out a huge amount of money due to border closures – I wouldn't even consider not getting it now," Malpass said.
Research by insurance provider Cover-More found a shift in attitudes towards travel insurance among younger consumers, with survey data showing 84 per cent of Australians under 30 intend to buy travel insurance.
"Younger customers appear to be taking insurance for the first time because of the extra certainty it gives them against the risks of COVID-19 impacting travel plans," said Todd Nelson, managing director for Cover-More Australia.
Nelson also noted a sizable surge in travel insurance claims as international travel makes a bumpy return. "Current claims volumes are even higher than the peaks we had pre-COVID," he said.
Canstar finance expert Steve Mickenbecker said: "COVID risk significantly lifts the likelihood and size of claims against travel insurance. This has to result in higher premiums."
Mickenbecker also cautioned consumers not to be lured in by cheaper policies amid surging policy prices.
"Some policies exclude claims arising from COVID or pandemic generally, and consequently may be able to quote lower premiums, so it's important that travellers don't choose exclusively based on price, but investigate the breadth and level of cover," he said. "A very low premium might set off alarm bells that important cover is excluded."
Providers have also introduced policies with a special COVID excess over and above the regular excess, Mickenbecker warned. "This means out of pocket costs will increase when a COVID-19 event is claimed," he said.
Choice travel expert Jodi Bird said travel insurance prices have increased on average by around 10 per cent, though this can vary widely.
"People with existing medical conditions in particular may find prices increase steeply," Bird said.
A policy covering two weeks' travel in Europe with unlimited cancellation cover started from about $500 for travellers in their 30s, and soared to almost $1000 for those over 70, with no pre-existing medical conditions.
Mickenbecker said older Australians will find cover particularly dear during the COVID era.
"The older age group's greater susceptibility to a serious event such as COVID transmission lifts the risk that intensive medical care may be required. This translates to yet higher premiums," said Mickenbecker.
Cruises are also popular with this cohort, and carry a further premium loading due to the high virus transmission risk, Mickenbecker said.
"Unfortunately for the aged, premium loadings can add up. Comprehensive travel insurance, however, remains a must."
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