Am I covered for Coronavirus Travel Insurance?
The global travel industry has taken a massive hit from the COVID-19 pandemic, one that could end up spending most of the next decade recovering from.
It isn’t just the damage done directly by countries shutting their borders and implementing strict lockdowns that have seen planes grounded and hospitality venues closed en masse. The psychological impact on travellers is just as significant.
Large numbers of people will already be thinking twice about travelling abroad in 2021, either because they don’t want to put themselves at risk of catching the virus or just don’t see it as worth the trouble when you have to factor in things like quarantines, testing and the risk of getting stuck in a local lockdown.
For those who have no choice but to travel, travel insurance cover has taken on new importance. The casual culture around travel insurance that saw a staggering 8.6 million UK travellers head abroad without cover in 2019 has had a wake-up call.
It has never been a good idea taking risks with the high costs of medical treatment should you fall ill or suffer an accident in another country. After all, what’s a few pounds if it ends up saving you tens of thousands in hospital fees? With COVID, the heightened awareness about all issues medical seems to have helped press that message home, at least.
At the same time, such as the risk of trips being cancelled at the moment, whether because of lockdown restrictions being imposed on a destination or because a member of the travelling party develops symptoms, that people naturally want to protect the money they put into a planned trip. That has caused a significant spike in travel insurance purchases this year, and we can expect more of the same as the travel industry (hopefully) starts to find its feet again in 2021.
But the key question is – does your travel insurance policy actually cover you for events related to COVID-19? Unfortunately for ordinary consumers, this is something of a minefield, the answer depending very much on who you buy your insurance from, what you claim for and what the official travel advice is when you travel. We will do our best to unpack all of this below.
Known events and FCDO advice
The reason why cover for COVID-related illness and cancellations is even an issue is that the pandemic is now classed in insurance circles as a ‘known event’. Generally speaking, insurance is there to provide protection against the unforeseeable – accidents and other unfortunate occurrences, which no one could have predicted happening with any certainty, that end up costing people money.
As soon as the likelihood of an event reaches a certain level of probability, insurance providers shy away from offering cover. This is what they call a ‘known event’ – a known contingency that makes it more probable people will want to make claims. For insurance companies it is about self-preservation – imagine, for example, how quickly a car insurance provider would go bust if they paid out on tanks of fuel running out, a ‘known event’ that happens with a predictable level of regularity.
So from the insurers’ point of view, the COVID-19 pandemic is a known event which greatly increases a) the likelihood of trips being cancelled and b) the frequency of travellers making medical claims if and when they catch the virus abroad. That has been enough for many providers to change their policies to refuse cover for anything to do with COVID-19, making it harder for travellers to find the policies they really want.
Even if you do find a policy that covers you for COVID-19, the other key factor is the official travel advice. The Foreign, Commonwealth and Development Office (FCDO) issues advice about the safety of travelling to every country, which throughout 2020 has been dominated by the coronavirus. Whatever policy you have, if the government advice is not to travel to a certain country and you decide to go anyway, you will invalidate your insurance.
When is a cancellation not a cancellation?
In truth, although medical payouts represent by far and away the biggest financial risk travel insurers take on, what they are more worried about in relation to COVID-19 is cancellations, just because the incidence has gone up by so much.
In theory, cancellation cover is there to provide a final safety net of protection in case your flights or accommodation are cancelled and your airline, booking agent, hotel etc find some pretext not to offer a refund. But drawing on the ‘known event’ contingency, many providers have decided to apply conditions to their cancellation cover – for example, not paying out if your holiday is cancelled because of lockdown restrictions, even if they come in after you book.
Other insurers have decided not to extend cover to incidents where the travelling party has to cancel because they have been diagnosed with the virus or are showing symptoms. The only way to get to the bottom of what cancellation cover means in each case is to read the small print.
A boon for the specialist providers?
Not every insurance firm has decided it is not in their commercial interests to offer cover for COVID-19. Some have realised, because of the relatively slow progression of the illness, that the chances of catching the virus abroad and then falling so ill that you are hospitalised before you return home are actually quite slim. More and more are therefore offering COVID medical cover but at a price.
Others have chosen to reintroduce at least some form of cancellation cover, but with conditions attached as discussed above. Rarest of all are those providers who are prepared to offer medical AND cancellation cover related to COVID. They are out there, a small but brave band of specialists.
What we can perhaps see is the start of two trends in travel insurance providers. One is that many non-traditional players, typically banks and other big financial institutions that have decided to dip a toe in the travel insurance market over the past couple of decades, are perhaps having second thoughts now that COVID has made the running heavy. Many of these banks used travel insurance as an added sweetener on products like current accounts and credit cards, but the risk of significant payouts has undercut any value to be gained. Not only are most banks flat refusing to offer cover for COVID, but big names like Halifax and the Post Office have also pulled out of travel insurance altogether.
The other trend is that we may see the smaller, specialist, niche providers rise to greater prominence. Firms that base their business model on offering cover for pre-existing medical conditions – Avanti Travel Insurance is a good example – have been in a much better position to pivot to the new demands created by COVID-19. It’s these specialist firms that are much more likely to offer comprehensive cover for both COVID-related medical and cancellation claims. They can therefore expect to grow their share of the market over the next 12 months and beyond.
*Collaborative feature post*
