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Age and Travel Insurance

Why age is important to insurers when pricing travel insurance

Although travel insurance often includes valuable cover for things such as lost baggage, cancellations and disruption to holidays, it is fundamentally designed to cover the cost of emergency medical treatment needed when you are abroad (and to pay for special arrangements needed to return you home). For this reason, it is medically underwritten and so takes into account pre-existing medical conditions, age and the cost of treatment in the destination of travel - which can vary significantly.

Interestingly, older age groups are more likely to also have a pre-existing condition which in some cases may affect their premium and in general may be more likely to travel to destinations, such as the Caribbean, where the cost of treatment is significant. This does not mean that travel insurers assume that age is a proxy for either a pre-existing condition or destination of travel, with each asked for by insurers in their own right. Therefore, someone applying for insurance may see their premium increase purely based on the destination of travel, regardless of their age.  

Chart One - Average claim, average premium and claims frequency travel insurance by age, 2017

Chart One shows the average claim, average premium and claims frequency for travel insurance by age in 2017. Although not entirely steady for all, the trend for all three shows that claims frequency, premium and cost of the claim are all higher for older groups than younger groups. The average cost of claim is slightly more for those aged 18–25 than those aged 26-35 but this is offset by a lower frequency of claim for those in their early twenties. Unsurprisingly, average claims frequency and the average cost of claim both spike at age 86-90. There is a dip in those aged over 91 but these figures may be less reliable given the significantly fewer number of travellers in that age bracket.

Of particular interest to note is that, on average, although the cost of premiums increases with age, the cost of claim increases significantly and Chart One suggests that the value of the premium therefore increases too. This is further supported by the increased claims frequency.

Overall, the key trend is that increases in age correspond with increases in average claims costs, claims frequency and premiums but other associated factors, such as the likelihood of a pre-existing condition and destination, are likely to be of real interest to insurers alongside age.