Travel policies evolve with COVID

The largest segment of the travel market — business travel — has been the slowest to rebound from the disruption of the pandemic. 

And as businesspeople return to the air, the insurance products covering them are changing. 

Business travel spending plummeted 71% in the United States from 2019 to 2020 — a nearly $100 billion difference, according to management consultancy McKinsey & Co. At the start of 2022, Transportation Security Administration screening numbers continued to reflect major declines in travel — most significantly in business travel with a 52-week average decline in ticket sales of 59.2% 

While there is significant ground to recover, corporate travel activity is on the rise, albeit slowly, but projections differ.

A survey by Deloitte Touche Tohmatsu Ltd. projects a return to 60% to 80% of 2019 levels by the end of this year, and a report from The American Hotel & Lodging Association, in collaboration with Accenture, projects business travel to stay down more than 20% from its pre-pandemic volume in 2022. 

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The timeline to recovery will be complicated by increased costs, including the cost of insurance. Premium hikes for business travel insurance will continue to be a factor as the risk profile of travel insurance continues to change quickly, according to Xavier Blanchard, United Kingdom-based CEO of Axa Travel Insurance and global head of travel at Axa Partners, both units of Axa SA.

“The drivers for price going forward in 2022 are quite clear,” Mr. Blanchard said in an email. “The most important one is the impact of omicron and subsequent variants driving a surge in the claims of quarantine or cancellation.”

The last weeks of 2021 were the most significant since the start of the pandemic, Mr. Blanchard said, “combining widespread testing, intense traveling for year-end and record high infection rates.” 

“Similar episodes may occur, depending on potential variants, and their epidemic profile,” he said.

Dmitry Boyko, New York-based assistant vice president of travel and accident at Arch Insurance Group, said the pandemic’s effect on the insurance industry has led to higher premiums and evolving coverage distribution channels.

The primary coverages of typical business travel insurance policies are “traditional, expense-oriented coverages” on “travel, accidental death and emergency medical,” said Christopher Howard, Philadelphia-based executive vice president, head of market management, accident and health, at Zurich North America. 

In the current pandemic, coverage for quarantine stays and COVID-19-related medical costs are included under the emergency medical component of business travel insurance policies, Mr. Howard said.

There is an optional “cancel for any reason” benefit, which travel insurance providers stopped offering early in the pandemic because it was “subjective,” Mr. Howard said.

“After the pandemic, I think a lot of companies are rethinking the ‘cancel for any reason’ policies,” Mr. Boyko said. “They understand that it’s such a big concentration of risk.”

The surge in travel insurance purchasing during the pandemic, as travelers became concerned about the costs associated with contracting COVID-19, raised the profile of the coverage. 

“People are now better aware of the necessity of travel insurance and have better product awareness,” Mr. Boyko said. “But with that, they know how to use policies better,” contributing to a rise in claims.

Mr. Boyko said coverage including medical and medical evacuation should be the No. 1 business travel insurance priority for companies revamping their travel plans this year. 

“If you travel overseas and get COVID and have to stay extra days in that country, that expense is going to be out of pocket for tens of thousands of dollars without that travel insurance in place,” he said.

The No. 2 priority should be a good travel delay benefit, he added.

Rising medical costs overseas are also a key driver on premiums, Mr. Blanchard said.

COVID has put medical infrastructure under stress overseas, driving up costs, Mr. Blanchard said. This trend may not reverse any time soon, meaning companies’ “ability to implement effective cost containment measures will be key,” he said.

The top challenge corporate travel buyers said they will face in managing travel in 2022 is “the complexity of border restrictions, quarantine and testing protocols,” the ITM survey found. 

Eighty-eight percent also said this would be the top factor to negatively impact their confidence in business travel levels next year. 

On this point, companies should adjust their risk management protocols to better consider the “health and sanitary risks” of all travel destinations, Mr. Blanchard said.

“A lot of companies currently have a country’s risk rating mainly based on crime and terrorism level,” he said. “It’s now important to also consider the sanitary risk score, maybe with a second score based on safety that considers the health care level of the country or area, and the capability of evacuating employees in case of a health issue, not only during a security incident.”

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Climate effects raise concerns

A factor exerting increasing influence on corporate travel decisions is sustainability commitments, researchers say.

“Influencing sustainable practice” was the second biggest challenge buyers say they will face in managing travel in 2022, an Institute of Travel Management survey found.

“The days of flying across the country for a one-hour meeting I think are long gone,” said Emily Weiss, New York-based global travel industry lead at Accenture, in a presentation at the Business Travel Forum in November. “Employees are going to be traveling farther distances or for longer durations

In a Deloitte Touche Tohmatsu Ltd. survey in 2021, 79% of companies reported having made a commitment to reduce carbon emissions or are working toward a pledge to do so. About half of survey respondents plan to optimize their business travel policy to reduce their environmental impact within the next year.

Sustainability commitments also have an added benefit in significantly reducing costs. Deloitte researchers note that costs in the hundreds of millions of dollars disappeared during the pandemic. According to the survey, 70% of companies are planning to “reduce travel frequency in an effort to bolster the bottom line.”

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