Increase in travel insurance policies

The tenuous state of the economy, belt tightening by consumers, rising unemployment and the lower foreign exchange value of the Pound have all combined to reduce overseas travel and demand for travel insurance policies according to a report by independent financial research company Defaqto.

Brian Brown, author of the travel report and Head of Research at Defaqto said: "Overseas travel by UK residents fell by almost 16% in 2009 as consumers reined in their non-essential spending and this has particularly affected the number of overseas short breaks taken. The resultant decline in demand for travel insurance will have badly hit the gross premium income of travel insurance providers."

Despite this bleak outlook the actual number of travel insurance policies available has increased by 9.5% from 930 to 1,018 during the past year. However there are only 44 separate underwriting organisations or partnerships that underwrite the core travel insurance policies and almost 50% of all policies are underwritten by the top five underwriters.

Mr Brown continued: "The fall in the value of the Pound has not only made foreign travel more expensive for the consumer but has also increased the cost of claims that insurers have to pay overseas. We envisage that insurers are still in for a bumpy ride as they work to protect their business over the next couple of years."