BLOG: Is it Time the Insurance Industry Re-Thought its Approach to Older Travellers?

Since 2012, when the Equality Act came into force, it has been against the law in the UK for businesses to discriminate against people in the provision of goods and services on the basis of age. Which is as much to say, in most circumstances, companies cannot refuse to provide a certain service to someone because they are elderly, or charge them more because of their advanced years.

There are, however, exceptions - one of the main ones being insurance. The insurance industry lobbied hard to be given an exemption, and on largely justifiable grounds. In order to remain profitable, insurance companies have to be able to adjust prices in line with varying degrees of risk. Older people, the industry argued, are more likely to claim against insurance policies, so they represent a high financial risk to providers. They should therefore be able to charge higher premiums to older customers. The government agreed.

Travel insurance is a model example of why providers fought for the right to charge older customers more - or retain the option not to offer cover at all. With medical cover for overseas trips typically set at limits of one or two million pounds, and the cost of care for foreign visitors notoriously expensive, providing travel insurance is a high-risk venture. The average pay-out on medical claims is well over £1000.

Older travellers, especially those with underlying medical conditions, are more likely to require medical care while abroad and therefore make these claims. To account for this inflated high-cost risk, most providers will look to charge senior travellers more for policies, and many operate an upper age limit, usually somewhere between 70 and 80, after which they will no longer offer cover at all.

A lucrative market
This angers consumer groups and puts some older people in a difficult position if they want to go on holiday or travel to visit family and friends. The feeling is, in many situations, insurance providers over step the mark in how they treat senior travellers.

There is particular discontent over the way many providers apply higher rates for older people. Many opt for rather crude and incremental price hikes which are added year by year once a customer reaches 55 or 60. One report claimed that, by the time someone reaches 80, the average travel insurance premium is 17 times what they would have paid when they were 55. That is simply pricing many older people out of buying insurance at all, giving them the tough choice of either not travelling at all or taking the risk of not buying insurance.

Similarly, consumer groups argue that blanket age caps are unnecessary and unfair, and should be replaced with individual assessments to ensure everyone who is fit and able to travel can do so. At present, less than one in five travel insurance policies are offered without an age limit.

The insurance industry might defend its right to mitigate against risk and protect its margins. But it could also be argued that potentially alienating today’s over-50s represents an even bigger risk for the travel insurance sector. A recent report from travel industry trade body ABTA highlighted just how lucrative a market today’s pensioners and almost-retirees are - they control a massive 80% of all disposable income in the UK, have a spending power approaching £10 trillion and, free from the shackles of work, they have the spare time to spend all that spare cash on travelling. This should surely be a demographic every business involved in the travel industry looks to court.

On that note, there are, of course, firms which are more than happy to focus on travel insurance products for the older market, which don’t apply age limits, which don’t automatically hike premiums higher after every birthday, which are committed to providing bespoke policies based on the medical circumstances of each individual, at a fair and transparent price. Find out more about senior travel here.

To date, these have been considered niche operators. But if mainstream insurance providers keep shunning the wealthy silver jetsetter market, pushing older travellers into the arms of these ‘niche’ providers, such companies will not remain on the margins of the industry for much longer.

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