Industry Analysis & Industry Trends
The path trodden by the Travel Insurance industry in the past five years has been full of ups and downs. Seesawing revenue can largely be attributed to the volatility of the financial market, rather than the underlying demand for travel insurance products. Overall, IBISWorld estimates industry revenue will grow at an annualised 1.0% over the five years through 2013-14. Revenue is forecast to grow by 0.4% in 2013-14, to reach $760.3 million.
The global financial crisis did not exhaust Australians' enthusiasm for travel. The number of international trips taken by Australians has increased at an annualised 8.8% over the past five years. This is mainly attributed to a strong Australian dollar, which makes overseas travel relatively cheaper. This, together with the rise of low-cost airline operators, has fuelled the growth of gross premium income in the Travel Insurance industry over the past five years. However, this is changing as the dollar falls in strength.
Despite strong underlying growth in demand, the industry has faced increasing costs. A main element of industry costs is reinsurance expense, which has hiked over the past five years. An unusually high incidence of natural disasters around the world has resulted in a rise in the volume and value of insurance claims, forcing reinsurers to increase premiums.
Profit margins have remained relatively healthy, although reinsurance costs have been increasing. Many operators are able to transfer cost increases to clients easily, allowing them to preserve profit margins. An increase in the use of online channels to distribute and market products has also helped many operators to lower operational costs and reduce commission payments to traditional retailers such as airline operators and travel agencies.
As the financial market recovers, industry revenue will be less volatile over the next five years. Australians are expected to take longer holidays, increasing expenditure on travel insurance. Profit margins, however, are expected to fall slightly due to increasing price competition from the online segment. In the five years through 2018-19, industry revenue is expected to grow at an annualised 1.8% to reach $832.3 million... purchase to read more
What is the Travel Insurance industry?
This industry underwrites (i.e. assumes, pools and spreads out risk of financial losses over policyholders in exchange for premiums) travel insurance policies. Coverage can include losses from trip cancellation and delay, lost baggage and medical emergencies... purchase to read more