We haven't reached the height of hurricane season and the travelinsurance industry has already experienced more claims from naturaldisasters and major events than normal. The difficult economy hasalso led to an increase in claim activity for trip cancellation asa result of job terminations or layoffs.

But all this has also meant higher revenues and increasedbusiness opportunities for travel insurance.

This is not surprising.

Historically, travel insurance purchases spike after breakingnews reaches the public concerning disease outbreaks, naturaldisasters or other major events. Fear of the unknown increasesperception of the need for insurance.

The aftermath of the September 11 terrorist attacks is a perfectexample of a major event where travel decreased but the purchase oftravel insurance increased.

Additionally, the latest United States Travel InsuranceAssociation Market Survey revealed that Americans spent nearly $1.6billion on travel insurance in 2008, reflecting steady growth insales of some 13 percent over the previous two years.

Fast-forward to 2010. In addition to economic turmoil, the firsthalf of the year included some notable events that drove interestin travel insurance, including the Swine Flu pandemic, IcelandicVolcano ash cloud and even the BP oil spill.

Our companies have recorded an increase of more than 25 percentin travel insurance policy sales this year. While the Icelandicvolcano event occurred during a relatively quiet travel period, wepaid out nearly $500,000 in claims for the travel chaos that ensuedand experienced an upward spike in sales following theeruption.

The hurricane season forecast, continued economic uncertaintyand threats of airline strikes suggest there will be continuedgrowth in travel insurance purchases through the end of 2010. Thesimple fact is that travel is still up over 2009, even though arecent USA Today/Gallup Poll showed only 16 percent ofrespondents plan to fly more or stay more often in hotels thisyear--and about 30 percent said they will travel less often.(USA Today, Dec. 28, 2009 http://bit.ly/7QaF6q)

Those that are traveling are insuring trips with an averagevalue of $1,427, according to our internal data. This represents anincrease of 23 percent over 2009.

Along with the overall increase in business for travelinsurance, 2010 also presents a mix of opportunities and challengesfor both the carrier and consumer.

As travelers become more experienced and better educated aboutthe benefits of travel insurance, we believe the market willcontinue to grow.

For that reason, we have devoted significant effort to educatingthe public and the travel industry about travel insurance, as wellas examining ways to simplify and call out specific policy termsand conditions. Some examples of policy enhancements arecancellation for business reasons and for active duty servicemen,police officers and firefighters called off approved leave due toan emergency such as a terrorist event, a natural disaster,etc.

The Affordable Care Act of 2010 may also provide futureopportunities for travel insurance. As the act takes full effect,Americans traveling overseas may have limited or no healthinsurance once they leave the borders, similar to what European andCanadian travelers are faced with today.

It has been estimated that Americans purchase one-third theamount of travel insurance as their European and Canadiancounterparts. The difference is mostly attributable to the absenceof health benefits outside the traveler's home country. As Americanconsumers understand the various restrictions within their ownhealth care coverage and how travel insurance can protect them, webelieve the number of people that travel insured will continue togrow.

CHALLENGES

The travel industry generally responds to high inventory withstable or lower prices, an increased willingness to negotiate, andmore online auctions to entice travelers. As is typical with a softmarket, carriers are broadening coverage.

One example is the creation of "cancel for any reason" or"cancellation at will" insurance programs. Unfortunately, "cancelfor any reason" insurance is problematic for carriers. It hasincreased the industry's risk exposure significantly and has littleviability for travel insurance in the long run.

First, while clients would like to see this feature, very fewtravelers are willing to pay the additional cost--about 50 percentmore than standard travel insurance.

Secondly a carrier could not earn enough premiums to cover theincreased risk exposure or a threat of a potential exposure.

"Cancel for any reason" allows one to cancel for reasons such asa sick pet, a lover's spat or even a bad hair day. Suppose a majornews outlet were to report on a possible pandemic arising in anarea of travel. This news would cause travelers to cancel out offear that they might become exposed--just as it did during theswine flu pandemic.

Finally, although it comes with a higher premium, it ismisleading to consumers because it is a partial reimbursementcovering only 75 percent to 80 percent of the amount of the tripinsured and the fine print excludes coverage if a consumer does notinsure the entire cost of their trip or if a trip cancellationoccurs within 24 or 48 hours of departure time.

This type of coverage has also received backlash from lawmakers.In New York State, for example, regulators do not consider thistype of coverage to be insurance and will not allow it.

Special interest advocacy groups have also presented challengesfor travel insurance. The Consumer Federation of America, whichrepresents nearly 300 nonprofit consumer groups, recently cautionedpeople about buying "add-on" insurances such as travelinsurance--an assertion that promotes misconceptions about travelinsurance.

For example, some people believe that travel insurance coverageis provided through credit card benefits or other types ofinsurance. Also, many believe that if travel insurance is purchaseddirectly from a cruise line or an airline, they are covered if thecruise line or airline goes bankrupt.

Travel insurance is not designed to replace insurance such ashomeowners or health care insurance. It is designed to providecoverage in places where existing policies do not.

For example, many homeowner policies have $500 or $1,000deductibles. Travel insurance baggage coverage fills in the gapcaused by the deductible.

Simply put, travel insurance is designed to protect againstdefined, unexpected occurrences related to travel. Travelinsurance, along with the emergency assistance services, helps toprevent financial disaster and has saved lives. During theIcelandic volcano incident, travel insurers' emergency call centerswere extremely busy assisting stranded travelers with alternativetravel arrangements, cash transfers, emergency prescriptionrefills, and relaying messages to family or friends back home.

Major, unforeseen events over the past decade have highlightedthe importance of travel insurance to domestic and internationaltravelers. In many cases, it has proven to be a win-win situationfor both the carrier and the consumer--driving business whilesaving money for travelers who suddenly find themselves with highunplanned expenses.

While we can expect 2010 to continue this upward trend, it isimportant to use these and other challenges as opportunities tocontinue to differentiate and build on our platform of insuranceproducts and services.

Grace Meek is chief business officer at DelosInsurance Group, a New York-based provider of specialty insuranceprograms.

Bill Dismore is chief operating officer andexecutive vice president at iTravelInsured(R), a licensed managinggeneral insurance agent specializing in the design and managementof travel insurance programs.

What Does Travel Insurance Cover?

Travel insurance is designed to protect against defined,unexpected occurrences related to travel.

• The purpose is to provide benefits for incidents that haveactually occurred.
• The purpose is not to provide benefits for a potentialincident, such as a possible pandemic.
• Some people incorrectly believe that travel insurance isprovided through credit card benefits or other types ofinsurance.
• Many people incorrectly believe that if travel insurance ispurchased directly from a cruise line or an airline, they arecovered if the cruise line or airline goes bankrupt.
• Travel insurance is not designed to replace insurance such ashomeowners or health care insurance.
• Travel insurance is designed to provide coverage where existingpolicies do not, for example, filling a baggage insurance gapcaused by homeowners policy deductibles.