Exploring the traveller underinsurance problem

Recent research has found that, in general, travellers are significantly underinsured when travelling abroad. Travel is a unique market among insurance products as there are factors that exacerbate the uncertainty from the consumers’ perspective, such as variable time periods of being insured, variable forms of coverage and scale, level of knowledge of the risks at the destination and the activities to be undertaken. We view the current state of the travel insurance market as inefficient as consumers are deemed generally misinformed and unaware of the intricacies of the products on offer and, we argue, behave sub-optimally due to behavioural patterns and perceptions regarding travel. In this commentary, we discuss issues that are unique to travel insurance products which may distort consumer perceptions and highlight a research agenda to address these issues and improve efficiency in the market.