Analysis: The uncertainty of insurance cover for Covid-19

Insurers have pulled up the drawbridge during the crisis and the insurance market is in uncharted territory, with all models used for assessing risks and policy cost out the window.

Abta chief executive Mark Tanzer told parliament’s transport committee last month the insurance market had been "pulling away" from travel.

"I think the government needs to work with the insurance industry and the ABI (Association of British Insurers) to bring them back, to give customers cover where they are travelling, and give them confidence – that will help travel agents."

FCO advice rules

The availability and extent of cover will be a big issue in determining travel’s recovery in the coming months. The first barrier is simply that insurers always pull the rug once the FCO advises against travel, so even if airlines are flying and quarantine relaxed, it’s the FCO that effectively gives the go-ahead unless you wish to travel independently and uninsured – and most won’t.

An ABI spokesperson said it was “unlikely” insurers would be willing to override the FCO.

“Generally, our position is that if the FCO advises against travel, you risk invalidating your insurance policy. As far as I’m aware, I’ve not heard of any insurers looking at overriding that.”

She added: “Insurers know travel insurance cover is important for consumer confidence when travelling so they will be looking at where they can extend cover once it becomes clear when FCO restrictions are lifted.”

The insurance industry regards Covid-19 as a “known risk” and not one it is willing to take. The exception is for holidays booked and cover bought before mid-March, although this will vary from insurer to insurer.

Rush Insurance, a broker that arranges policies for Hays Travel, among others, is typical of the market at the moment. Founder and owner Jeff Rush said: “We deal with a number of underwriters, none of which would provide cover if you decide to travel against the advice of the FCO.”

He added that what a customer or the FCO determines as “essential” travel is open to interpretation and said it may not agree with what an underwriter deems “essential”, while clearly, a fortnight in a hotel in Majorca will not qualify.

Rush said “one or two players are singing and dancing” about Covid-19 cover being included in their policies, but it is already included in many under emergency medical and repatriation cover while the policyholder is overseas.

Rush said: “Having cover in your policy to protect you whilst you are overseas is fine and dandy, if you are overseas; but currently you can’t get overseas.”

He said the vital missing element was that “Customers need cancellation cover, relating to a Covid-19 type situation, to protect their initial deposits and balance payments prior to departure.”

Rush believes an insurer will break ranks soon and offer such protection. “I believe so. I’m pretty certain that when one does it, many others will decide they can’t be left behind.”

Signs of movement

Things are slowly changing, with Saga now including Covid-19 medical and repatriation cover. A Saga spokesperson explained: “Saga has reversed what most insurers did three or four months ago. Most added coronavirus as an exclusion, so you could not claim repatriation or medical care. Anyone thinking about going abroad now has this cover in place.”

However, he cautioned: “We can’t compensate for cancelled trips at this point; that’s not in the cover.”

Howard Dove, Holiday Extras’ managing director, parking operations and insurance, said he was speaking to insurance providers on a daily basis.

“The market is very, very consistently not covering pretty much everything that is stimulated by Covid,” he said.

“Cancellations aren’t covered. The only thing really protected is if you catch Covid while on holiday, then you’ll get medical cover.”

Staysure is one provider flagging medical and repatriation cover for clients who contract the virus while on holiday, but again, it will only apply to countries the FCO has given the all-clear.

Despite Staysure and Saga’s initiatives, cover is still not comprehensive. “As far as I can see, no-one has anything (to offer) beyond medical care; we’ve started conversations with underwriters to see how we might provide some comfort,” said Dove.

Holiday Extras will put policies back on sale on 1 July, which will include cover for clients who catch Covid-19 while travelling including medical treatment and repatriation, and plans to brief the trade on exactly what the small print means. Dove’s advice to agents is: “Buying a policy is still super valuable, but make it clear to the customer what the coronavirus limitations are.”

Operators fill the gap

So the major hurdle for new bookers remains that insurers are unwilling to provide cover for clients who need to cancel if they contract the virus or are prevented from boarding a flight or any other form of transport due to a Covid-19-related health issue. This has led at least two operators to take the matter into their own hands.

Asia specialist Experience Travel Group has claimed an industry first with a Covid-19 cancellation guarantee, which offers a “no quibble cancellation” until the date of travel plus a £1,000 voucher per booking to be used on future reservations.

Sam Clark, ETG co-founder and managing director, said he had decided to offer the guarantee because the insurance market was “not working”.

“At the moment, it’s not possible to insure yourself if you get a temperature and are refused boarding,” he said, adding this was a “huge” issue for the industry.

Clark believes the issue will not go away, adding that even with the FCO lifting its travel advice, insurers “don’t tend to cover people contracting Covid before they travel”.

The issue was affecting 2020 bookings, he said, despite a key ETG destination, Sri Lanka, reopening to tourists from August. He said clients were “fine” with booking 2021, but that this year was a different matter: “Just when they get to the point of paying the money, not unreasonably, they are asking, can I risk it?”

Luxury specialist The Greek Villas has gone further, securing its own tailor-made policy for clients in partnership with Lloyd’s of London. It includes cancellation and full money refunds, accident and health coverage - including Covid-19 - and personal liability and legal representation.

It seems to have covered all bases, but with properties costing from £12,000 a week to rent, it’s appealing to a market that can afford to pay a premium.

There are even moves at government level in at least one destination anxious to restart tourism. Jamaica’s tourism minister Edmund Bartlett has confirmed discussions to provide an extra insurance safeguard for visitors.

An add-on fee of “less than $20 per person” would cover isolation and repatriation of anyone testing positive for Covid-19, he said.

The partnership with the insurance industry is part of measures to re-open the island to tourists from 15 June, when a “Covid-resilient” corridor covering most of the island’s north coast will be in operation. However, there is no mention of cancellation cover.

Whichever path is taken, insurance, with its valuable medical, legal and baggage cover, will remain part of the consumer protection mix. Perhaps though, for the foreseeable future, it will be part of a system that includes operators, airlines and hotels offering booking changes or refunds right up to departure.