Ralph: The CDC continues to change travel rules, so it is difficult to say what long-term impact the pandemic will have. However, I would think that travelers will be more in tune to find travel insurance coverage that protects them from such events in the future.

A pandemic can create huge payouts for interrupted travel, so the cost to the consumer of such insurance will likely increase as demand goes up. It is going to require the consumer to be very diligent when comparing policies to see what is covered. Consumers are also going to need to compare what percentage of reimbursement is covered by different plans.

Aniruddha: When the COVID-19 pandemic, which started almost 16-18 months ago, was raging and at its absolute worst, there were travel restrictions, and fewer Americans traveled due to fear of contracting the virus. In the last 3-4 months, with many Americans undergoing full vaccination, the situation has somewhat changed, and with almost a year of work from home/social distancing norms, there are many who want to be adventurous and are willing to travel.

What this means is that travel insurance for a trip assumes great importance and travelers are very vigilant about this. This is because travelers want to protect themselves in case there is one more wave of COVID in the United States, or if the countries they are traveling to are experiencing a sudden surge in cases.

One has to also keep in mind that when the pandemic suddenly started, many travelers had to abandon or cancel travel plans at the last minute because they had not taken travel insurance, and without such coverage, they were hit hard. There is a significant financial impact that can be felt without travel insurance coverage, especially if it’s a family that is traveling. That is why travel insurance has become a must-have and necessity in today’s COVID-impacted world.

Travel insurance companies recognize this and have built in provisions, such as “Cancel for Any Reason” (CFAR) for travelers. The travel insurance industry that was adversely impacted by the pandemic in 2020 is slowly recovering and creating innovative new products like CFAR. If travelers take CFAR, they can cancel a trip because of COVID-related illness, quarantine requirements, boarding problems, or a surge of cases in the country they are visiting, etc.

Also, many foreign countries such as Thailand, Jordan, Aruba, etc., require COVID coverage for visitors. Despite the add-on cost, CFAR upgrade has become popular with travelers, but a word of caution—it is important to read the fine print, be aware of exactly what features your insurance is covering/what your coverage will pay for, and more importantly, when in doubt, ask questions to the travel insurance company.

Elaine: The pandemic has resulted in heightened awareness by consumers of what types of risks are related to travel, including medical risks. As a result, the purchase of travel insurance might become a standard cost budgeted by consumers when planning a trip.

In addition, the pandemic has highlighted the types of risks that will be related to travel going forward, including new ones such as unanticipated travel restrictions imposed by countries, or new health-related events.

Ralph: The cost of travel can be very high, depending on the venue. Younger people have a much more global perspective and travel at greater rates than generations in the past. Younger consumers, given their income stage, may be more likely to want to pick up travel insurance to protect the money they are spending.

It would seem that the greatest driving factor behind consumers purchasing travel insurance will be affordability. It may be the case that travelers of any age who have not purchased insurance in the past might be more inclined to do so in the future.

The added insurance cost might result in consumers shortening their travel dates to cover the additional expense. Another consequence might be that consumers spread out the time between travel plans due to the increased cost. Such decisions will be based on what insurers end up charging.

The pandemic would likely also impact what destinations people are considering when making travel plans in the future. Travel destinations that are in pandemic hotspots may be uninsurable or may bring a hefty insurance cost. This would likely impact the travel industry as consumers look for destinations that are less risky and thus may carry lower travel insurance costs. This could certainly have a negative economic impact on some hotspot countries that rely heavily on tourism.

Aniruddha: The pandemic has definitely impacted the lucrative travel business because lots of travelers were unwilling to take the risks of traveling due to the fact that almost all countries were experiencing a major surge. Social distancing norms and gradual information about the virus (which was still new and did not have any precedent) unfolding left many travelers confused. For example, the notion that older people and young children are more at risk from the COVID-19 virus resulted in several families canceling travel plans in 2020.

Travel insurance has always been considered a safe way to hedge your bets and maintain flexibility against any kind of uncertainties, and against the backdrop of the uncertainty caused by the COVID-19 pandemic, it becomes supremely important. With several Americans having gone through vaccination, and with the advent of summer and school vacations, many consumers want to travel. But even then, there is always the fear of another pandemic wave either within the U.S. or while traveling internationally. In such a situation, travel insurance that allows for cancellations, partial refunds, illness, hospitalization, quarantine, etc., is very important. Therefore, consumers are purchasing travel insurance, which is an important consideration during these testing times.

Elaine: Consumers still want to travel. In fact, indications are that there is quite a bit of pent-up demand for vacation travel. However, consumers might also have different risk factors that might make them more fearful about traveling during uncertain times. As a result, if they can purchase insurance that allows them to have flexibility and to avoid financial risk, they might feel more comfortable about making travel plans.

Ralph: It is my understanding that a pandemic is not always a covered event in some travel insurance policies. Potentially huge payouts by insurance companies will drive insurance costs up if demand for such coverage remains high. Because of this, we may see more competition between insurers trying to entice consumers to carry their insurance, and such competition may control price escalation to some degree.

No matter what the result, consumers will need to spend more time educating themselves and comparing plans to make sure they find the right policy that meets their needs.

Aniruddha: First, let us take a look at some of the challenges that consumers face in the post-COVID world because these are interrelated with challenges faced by travel insurance companies. Consumer challenges are regarding when to purchase travel insurance. With the devastating rates at which the COVID virus infects entire countries, there is considerable risk in planning your travel too far in advance. On the other hand, if travelers plan a trip on short notice, then there is the possibility that they will be unable to cancel the trip or not have the same flexibility offered if they purchase earlier (because of conditions built around the coverage).

The CFAR that many companies are offering is a good option but needs careful review of the fine print involved, which can be cumbersome and slightly complex, especially for first-time travelers. Along with this, there are other issues for consumers, such as COVID-testing costs (mandated by certain countries, if international travel is involved), quarantine costs, hospitalization costs, death and funeral costs, evacuation costs, etc. This can be pretty intimidating even for experienced travelers. Travelers are also flustered by reading all the fine print of what is covered and what is not.

Based on these consumer challenges, what are the challenges that a travel insurance company can likely face? First, how can companies optimize service processes because of heightened travel demand and consumer questions focused around travel; second, how can travel insurance companies introduce innovative new products that are a win-win for both the company and the traveler; third, how can travel insurance companies conduct market research to understand consumer concerns and needs; and fourth, how can travel insurance companies streamline processes and work with third-party partners/vendors when their travelers are stranded due to COVID-19 restrictions in a foreign country/or need emergency medical services/hospitalization? Therefore, to sum it up, it is important for travel insurance companies to work with consumers, co-create value, provide unparalleled service, and ease concerns through transparency and clear communication.

Elaine: Because consumers are now more knowledgeable about travel-related risks, they will be more demanding when shopping for travel insurance policies. Insurers will have to be agile enough to modify their policies and coverage in response to those increased demands.

In addition, there are new risks that were probably not factors in the past. Normal activities, like rerouting planes due to weather conditions, might result in significant issues, if the planes land in countries that won’t admit certain passengers, based on where they live or if they are vaccinated. Insurers will need to develop policies and levels of coverage for those events.

And currently, medical travel insurance is separate from travel insurance. Perhaps Insurers will begin to package these coverages. Or they might develop à la carte pricing for different types of add-on coverage. They might also consider partnering with airlines or other travel-related businesses, in order to share travel risks.

If handled properly, travel insurance coverage could be modified to address the concerns of consumers, while improving the profits of insurers.