Is travel insurance changing to match our climate?

As our climate warms, is travel insurance evolving fast enough?

Travel insurance is an essential – as soon as you’ve parted with your money, you want to know you’d be covered if things go wrong. Normally you think about your luggage, accommodation amd flights.

But more frequent and more impactful weather events have occurred in recent years. Last summer, heatwaves swept across Europe, and even resulted in wildfires across Greece and Italy.

As our climate warms, and we seemingly yo-yo between extreme heat, storms, and frost, we’re asking what that means for holiday-makers and their cover. How is the insurance industry evolving, and is it keeping pace with climate change?

Why can we attribute extreme weather to climate change?

Many factors can contribute to extreme weather events, some of which are natural, and others can be linked to climate change driven by human activity. The Met Office explains how scientists conduct lengthy climate change attribution studies, collecting observations, running computer models to simulate the Earth’s climate and analysing the results.

Many pieces of information go into these simulations, including natural climate variations, weather patterns, greenhouse gas emissions, sea surface temperatures and more. The Met Office’s model runs two versions of a simulation, one that mimics the current climate including climate change driven by human activity, and a second that removes the human influence on things such as greenhouse gases. Comparing the two versions allows us to understand what effect climate change had on an event.

For example, a comparison of the Summer 2019 European heatwave with a simulation of today’s climate including human-driven climate change versus a model simulating the climate from before the Industrial Revolution. The results showed that the heatwave was about 10 times more likely because of climate change, and 1.5-3°C hotter because of human activity.

What does travel insurance currently cover?

Travel insurance covers you financially if something happens to you while you’re away or before you travel. This could include the costs of cancelling your trip if you become ill and can’t go, the costs of emergency medical treatment whilst you’re away, or if your baggage is lost, damaged or stolen during your trip.

The type of holiday you’re taking and the activities you’ve got planned might mean you need specific cover. For example, a ski or safari trip will have a different risk profile to a beach holiday, or the destination could be considered high-risk, due to crime levels or political instability. You can read more about the different holiday insurance considerations here.

But where does that leave us with the climate? Well, while more travel insurance policies don’t cover heatwaves, droughts or flooding specifically, your policy should cover you for any related impact you could have, i.e., emergency care.

If a situation is serious enough, the Foreign Office may issue a statement, or even intervene. If there’s confirmation from the government that it is no longer safe to travel, you can obtain a full refund before you embark on your visit. However, in a severe situation, if the Foreign Office doesn’t issue advice not to fly, it still means that you’d only be able to claim if you or a family member becomes ill, or you experience a long delay.

In a situation like this, if you’ve booked through an agent then always contact them in the first instance for advice. If you’ve booked directly with an airline and a hotel, it’s worth reaching out to see if they can change the dates of your booking. Then, if that doesn’t work, see if your travel insurance provider can offer additional support.

Top travel insurance pitfalls

As with any financial product, it’s always important to read the fine print and understand the specifics of what is and isn’t included in your policy. Otherwise, you might find yourself caught out. Here are some key things to keep an eye out for.

Exclusions: Some specific situations might not be covered by your policy. It could be things such as failing to have the recommended vaccinations or failing to hold the right documents for travel. A common one is engaging in sports or activities not covered by your policy.

Pre-existing medical conditions: It’s vital you declare these when purchasing travel insurance, so that you’re covered. It might mean you use a different provider or pay a different premium, but it’s well worth doing so in case you need medical assistance during your trip.

Time limits: You need to check what the duration of your coverage is. If you’re away for two weeks but only covered for 10 days, you could be left exposed if something went wrong.

Not purchasing soon enough: Sometimes policies have conditions about when you must purchase insurance in relation to your trip. So don’t leave it until the last minute to sort out your cover, as it could be too late!

Strike action: If you book your flights, hotel and transport separately, rather than as a package deal, you might not be covered in the event of strike action. It’s worth speaking to a travel insurance expert if you have any queries or concerns about this happening to you.

How is the industry reacting?

Consumers are already changing their decisions based on the risk of extreme weather abroad. An EU-funded study from summer last year found that the number of visitors planning to travel to Mediterranean destinations dropped by a tenth, while cooler climes like Ireland, Denmark and the Czech Republic surged in popularity. The European Travel Commission found that 7.6% of people now consider climate change and extreme weather worries to be a factor in where they holiday. So, is the insurance industry adapting?

The Association of British Insurers (ABI) emphasise that the primary purpose of travel policies to provide cover for medical emergencies abroad. And a recent survey of travel insurance policies reveals that almost half of both annual and single-trip travel policies (48% and 49% respectively) offer either no or optional cover for a natural “catastrophe”, such as the Greek wildfires last summer. However, 61% of annual policies will allow claims for compensation when a government formally advises against travel to a destination.

Interestingly, some newer insurance products coming to the market are involving weather-based ‘bolt-ons’. So-called ‘weather-guarantees’ use climate risk technology to offer cover against downpours, which can be a major holiday killjoy, or debilitating heatwaves.

It’s possible then, that more insurers will start using historic and current weather data to calculate the risk of extreme rain or sunshine and trigger an automatic pay-out once a certain level is reached. This is a form of parametric insurance. It seems this is still in early stages, but it’ll be curious to see if this approach to travel insurance takes off.

As a Group, Howden firmly believes that insurance has a vital role to play in the future of our planet. Insurance has an enormous role in the seismic shift that climate change is – helping to manage the risks, instil confidence, and build resilience.

Curbing global warming is a daunting task. To hit the 1.5°C target of the Paris Agreement, entire industries will need rethinking. And wherever major change is happening, insurance has a big part to play. That’s why we operate a no-limits approach to climate resilience.

Make the most of your holiday

If you are thinking of travelling soon, we hope this helps guide you about what to look for in the terms of your cover. And, if you want to talk through any queries or concerns, our travel specialists are here to help, over the phone or in-person at our Farnham and Oxford branches.

Sources: BBC, Met Office, The Independent