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Demand for travel insurance in the United States is set to skyrocket this year as more Americans grow cautious after a spike in flight cancellations and lost luggage over the past two months has upended the vacation plans of tens of thousands across the country.
According to flight-tracking website FlightAware, cancellations in 2022 rose 73% year-on-year to 210,503 flights, mostly due to inclement weather and network outages.
Led by Southwest Airlines, the country’s airlines, including American Airlines and Delta Airlines, canceled hundreds of flights during the December-January period.
Due to nervousness, travel insurance policy sales in the two weeks between December 26 and January 8 rose 16% over the previous two weeks, according to data from insurance comparison site Squaremouth.
Policy sales in 2022 were up 81% year over year and 449% over 2020.
“We expect demand for travel insurance could grow by another 30% this year,” said Steven Benna, Squaremouth’s marketing manager.
Travel insurance typically covers claims for lost luggage, flight cancellations, lost passports, and failed hotel bookings, among other things.
Emergency medical insurance and trip cancellation were the top reasons for purchasing travel insurance among 500 US-based travelers, according to a survey by World Nomads, which insures independent travelers from more than 130 countries.
The company saw a 56% increase in policy sales from December 2022 to January 2023 compared to the same period last year.
The rising appetite for travel insurance could also increase premiums in 2023, forcing insurers to optimize coverage or raise the bar for insurance take-up, according to an insurance broker and executive director of a travel risk company.
“I wouldn’t be surprised if it (the premium) exceeded the rate of inflation across the board,” Dan Richards, chief executive of travel risk and crisis management firm Global Rescue, told Reuters.
The average cost of travel insurance in 2022 was $278, up $33 from the year before, according to brokerage firm Insuremytrip.
Rather than increasing rates, travel insurance providers may seek to adjust certain benefits or coverage requirements, said Suzanne Morrow, the company’s senior vice president.
“For example, if a plan has a travel delay benefit that kicks in after three hours, they can increase the delay requirement to six hours.”
Travel insurance companies have now pinned their hopes on buoyant demand after optimistic forecasts from major US airlines helped offset losses from the large number of claims received.
“There’s also more concern from travelers than ever, leading to more people taking out travel insurance,” Squaremouth’s Benna said, warning there could also be a rise in claims.
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