The strong Australian dollar has made overseas travel cheaper, fuelling demand for travel insurance.
Melbourne, Australia (PRWEB) May 20, 2014
The path trodden by the Travel Insurance industry in the past five years has been full of ups and downs. Seesawing revenue can largely be attributed to the volatility of the financial market, rather than the underlying demand for travel insurance products. Overall, IBISWorld estimates that industry revenue will grow at an annualised 1.3% over the five years through 2013-14. Revenue is forecast to grow by 2.0% in 2013-14, to reach $772.6 million. The global financial crisis did not exhaust Australians' enthusiasm for travel. The number of international trips taken by Australians has increased at an annualised 8.8% over the past five years. This is mainly attributed to a strong Australian dollar, which makes overseas travel relatively cheaper. This, together with the rise of low-cost airline operators, has fuelled the growth of gross premium income in the Travel Insurance industry over the past five years. However, this is changing as the dollar falls.
Despite strong underlying growth in demand, the industry has faced increasing costs. A main element of industry costs is reinsurance expense, which has hiked over the past five years. IBISWorld industry analyst Ryan Lin states, “An unusually high incidence of natural disasters around the world has resulted in a rise in the volume and value of insurance claims, forcing reinsurers to increase premiums.” Profit margins have remained relatively healthy, although reinsurance costs have been increasing. Many operators are able to transfer cost increases to clients easily, allowing them to preserve profit margins. According to Lin, “An increase in the use of online channels to distribute and market products has also helped many operators to lower operational costs and reduce commission payments to traditional retailers such as airline operators and travel agencies.” As the financial market recovers, industry revenue will be less volatile over the next five years. Australians are expected to take longer holidays, increasing expenditure on travel insurance. Profit margins, however, are expected to fall slightly due to increasing price competition from the online segment.
The Travel Insurance industry exhibits a high level of market share concentration. Like many other financial service industries, the insurance sector is dominated by a handful of large multinational financial services companies. The industry is also characterised by a number of independent agents who underwrite and issue travel insurance in partnership with foreign insurance companies. In the five years through 2013-14, industry establishment numbers have remained relatively stagnant, as many industry players offer a diverse range of insurance products in addition to travel insurance. This is largely expected to be a result of risk diversification strategies that insurance industry players adopt, spreading risks over a range of products and regions. Major industry players include Great Lakes Australia, Allianz Australia, Suncorp, QBE and Insurance Australia Group. For more information, visit IBISWorld’s Travel Insurance report in Australia industry page.
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IBISWorld industry Report Key Topics
This industry underwrites (i.e. assumes, pools and spreads out risk of financial losses over policyholders in exchange for premiums) travel insurance policies. Coverage can include losses from trip cancellation and delay, lost baggage and medical emergencies.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.