The new complexities of corporate travel insurance

Insurance is no exception to the rule that everything connected with business travel has been rewritten by the coronavirus crisis. As travel resumes, expect premiums, and exclusions on coverage, to increase while some insurers stop offering cover all together, experts in the sector have warned.

The virus-induced changes mean companies need to think much harder about how they buy a service which has not always received the attention it deserves. “Companies should make themselves better at negotiating and not just take a product off the shelf. You now really have to understand what the package includes and how it’s priced,” says Robin Ingle, CEO of insurance consultancy Ingle International.

According to Peter Maher, client service director for the insurance brokerage Griffiths & Armour, Covid-19 has cost the global insurance industry an estimated £100 billion in losses, including for event cancellation and business disruption. Part of that bill also includes payouts on travel insurance for disrupted and canceled trips. As a result, the consensus of forecasts Maher has gathered from underwriters is that annual travel insurance premiums for corporate clients will rise 15-20 per cent in the coming months.

But “the insurance industry may take the opportunity to squeeze in more increases than necessary because everyone understands there is more risk,” says procurement consultant Earle Thomas. The withdrawal of some insurers from travel cover will speed the switch to a seller’s market, he adds.

However, Thomas successfully negotiated a travel insurance premium reduction of one third when working for his former employer. He is confident buyers can achieve good results even in this more challenging environment. Clients can point out they are likely to travel less than in the past, perhaps permanently, which may mean that premiums per traveler will rise but the overall bill will be lower than previously.

David Stirling, director of another brokerage, Crispin Speers & Partners, agrees but adds that setting premiums accurately is difficult when companies have only limited visibility of how much they will travel in comparison to pre-pandemic volumes. “We have tried to be as flexible as we can,” he says.

When clients come to renew, they can find some goal posts have moved. The good news is that insurers which continue to offer travel policies are very likely to cover anyone incapacitated by coronavirus during a trip. That could prove essential, according to Ingle, because some countries are beginning to insist inbound visitors carry insurance that covers Covid treatment.

But “where the problem comes is on the non-medical side, in other words trip cancellation or interruption,” says Ingle. “There isn’t carte blanche cover like there was pre-2020.”

Clients need to work with their broker to understand very clearly the circumstances under which cover is and isn’t available because policy offerings are likely to vary significantly. Pre-trip approval and careful monitoring of border entry requirements will also be very important, because insurers may not pay out for trips to countries travelers were not permitted to enter, says Maher.

As a result, travelers may need some form of vaccine passport to preserve the validity of their cover if the passport becomes a legal requirement for entering a country. But will vaccine passports become a direct condition of cover for insurance policies? On this question the experts are divided. Stirling and Maher believe not. “The underwriters I have spoken to say passports are not in the pipeline. There are no discussions on that,” says Maher.

Ingle says the opposite. “Insurance companies are in those conversations today,” he says. Cover may not be offered, or only for a much higher premium, to those who have not been vaccinated. Intriguingly, Ingle adds that the premium could even be adjusted according to which particular vaccine the traveler has received.

Whether a vaccine passport becomes a mandatory condition or not, even the possibility this may happen illustrates the growing need to coordinate management of insurance with management of the travel program.

Today, travel insurance is normally handled by whoever procures other insurance categories within the organization, such as the company secretary, risk department or, in very large businesses, a dedicated insurance team.

There are good reasons for consolidating insurance purchases, not the least of which is that while travel insurance may cost tens of thousands annually, the same company could easily be paying millions for professional and employee liability cover. Leveraging that greater spend can help keep the travel premiums lower and negotiate away any unwelcome exclusions regarding Covid, says Ingle.

But while travel managers need the support of the regular insurance purchasers in their company, Ingle argues the opposite is also increasingly true, and therefore a more collaborative approach is required. “The travel manager has to be involved because health is going to be a major part of corporate travel programs going forward,” he says.

Attention to detail is important in other respects. “The cost of insurance in some countries can be greater than the potential cost risk of providing medical treatment to a traveler while they are on-trip,” says Carol Randall, founder and managing director of Sage Travel Consulting.

“So large multinational organizations may not have a standard insurance policy which covers everyone globally – a more piecemeal approach can be taken for different countries based upon market conditions.”

The more information companies can provide about their travel program, the better tailored a policy they will receive, says Maher. Number of travelers and number and duration of trips are all important, but so too is the purpose of the trip, with any kind of manual work attracting a higher premium.

Destination is also a key consideration. Clearly, high-risk destinations such as Iraq or Syria need to be flagged, but there are less obvious factors at play too. For example, US-based insurers may not cover trips to Cuba because of sanctions applied by the State Department.

Most important of all is simply to make sure there is cover. Stirling warns companies to check they still have a valid policy. With so much disruption to operations over the past year, and few or no employees traveling at present, there is a risk that renewals may have been overlooked.

Not to have comprehensive travel insurance could be very costly. Thomas recalls how relieved he was to have negotiated a good policy at his former company after an employee was run over by a sports utility vehicle on the streets of New York and had to spend six months recovering there before eventually being repatriated to the UK by ship .

The excellent treatment she received reassured other employees they too would be looked after if anything untoward befell them while traveling – but the bill came to £670,000. “We didn’t have insurance, that would have been ours to cover,” says Thomas.

“Insurers pay out sometimes for travel losses in excess of £1 million, and losses of £250,000-£300,000 are common,” says Stirling. “For a premium of £50 or £100 per person, it’s money well spent.”