Up goes travel insurance, all under the umbrella of Brexit

Is Brexit going to push up the cost of your travel insurance this summer? Nationwide this week effectively blamed the Brexit-inspired fall in the pound for the decision to increase the cost of its popular FlexPlus packaged current account by 30%, from £10 to £13 a month. It has grabbed a sizeable share of the packaged account market and comes with a range of benefits including worldwide family travel insurance.

However, Nationwide says the price of providing this cover, and other perks such as mobile phone insurance, have risen substantially. “The cost of the exchange rate, particularly for travel insurance, has increased,” says the society. This refers to the fact that the slump in sterling since the Brexit vote has impacted on meeting overseas medical bills and other claims.

The move comes hard on the heels of NatWest’s decision to nudge up the cost of its Reward Platinum current account, which also comes with worldwide travel insurance, from £18 to £19 a month as of last Monday. In addition, account-holders aged 70-plus have to pay more to receive the travel insurance benefit (see below). The bank indicated that it, too, has seen its costs increase and that is partly why it has had to make changes to its packaged account range.

A year after the Brexit vote, the pound was this week down 12.9% against the euro and 13.1% against the US dollar. In fact, its value versus the euro was at its lowest level so far this year. This translates into higher medical costs for insurers, because when policyholders become ill or are injured abroad, the insurance company will usually have to pay the healthcare provider in the local currency.

Coincidentally (or not), the typical price of a travel insurance policy has gone up by a similar amount – about 12% – over the past year. The Association of British Insurers (ABI) has revealed that the average annual travel insurance policy stands at £37 – up from £33 a year ago. Its data shows that the number of travellers claiming for emergency medical treatment has actually fallen – from 166,000 in 2015 to 154,000 in 2016 – yet the amount paid out by insurers has increased from £196m to £199m. This helped lift the total paid out by travel insurers last year to £370m – the highest figure since 2010.

However, figures from price comparison site Comparethemarket.com show that not everyone is paying more. It says the cheapest travel policy in May 2016 was £6, while in May this year it was £5.29. Both were based on the same scenario: a 40-year-old travelling to Europe for a week, with no medical disclosures.

Whether or not the Brexit vote has already pushed up travel insurance costs, there was a warning this week that we could all end up paying more if the UK isn’t able to continue with the European health insurance card (Ehic) scheme when it leaves the EU. Britons take 32m holiday trips to the EU a year, and Ehic reduces costs because it allows people to receive state-funded health treatment.

“Clarity is needed as soon as possible, given that insurers offering annual travel policies in April 2018 will have to prepare for the possibility of covering these costs after the UK is set to leave the EU in March 2019,” says the ABI.

However, last Sunday, Brexit secretary David Davis suggested that the UK would cover the cost. “We’re looking to see if we can get a continuation of Ehic as it now exists,” he said. “If we can’t, we will provide one unilaterally.” The Daily Telegraph quoted Whitehall sources as saying any new arrangement would begin on the day Britain leaves the EU so travellers “won’t notice any difference”.

It’s a big bill: according to a Guardian report in 2015, the cost to other states in the European single market for treating ill British tourists was £155m in 2013-14. This was more than five times the £30m cost of treating ill visitors from other European countries using the NHS, it said. However, the Department of Health told us it reimburses other European countries for the cost of providing treatment “to people we are responsible for under European Union law, based on eligibility irrespective of nationality, which would include costs for usage of Ehics. In the same way, other European Economic Area countries and Switzerland reimburse the UK for the cost of the NHS providing treatment to people they are responsible for under EU law, which would include British residents”.

While it is vital that you have a valid Ehic, insurers say it is not a substitute for travel insurance. You can apply for, or renew, an Ehic using the official online application form. You can also download the Ehic smartphone app from the European Commission website.

What’s on offer

Fee-charging packaged current accounts, which offer benefits such as travel insurance and card protection, have long been controversial. But last month the Financial Ombudsman Service revealed there had been a dramatic fall in complaints and that, in most cases, the extras had been useful for customers or saved them money.

But be aware: they can be pricey, with some costing more than £200 a year, and if you are tempted to sign up make sure you actually use the various perks.

Consumer organisation Which? concluded that the best value was Nationwide’s FlexPlus. With the monthly fee going up for new and existing customers, it will set you back £156 a year. Although it is ditching some of the benefits, the worldwide family travel insurance – which includes winter sports, golf, wedding and business cover – is staying, and Nationwide is “further improving” it by extending cover to family members travelling independently of the account holder but who live at the same address.

It also offers the option of paying an additional £50 a year to stay insured once customers reach its age cap of 75.

In addition, the maximum number of claims allowed under the account’s mobile phone insurance will increase from two to four a year.

On 26 June, NatWest lifted the cost of its Reward Platinum current account from £18 to £19 a month, and cut the cashback rate from 3% to 2%. The latter also applies to the £12-a-month Reward Silver. Both accounts come with travel insurance, though Silver and Platinum customers aged 70-plus will see their extra premium rise from £50 to £75. For both, the mobile phone insurance excess is increased from £75 to £100.

Other banks offering packaged accounts include Lloyds, Halifax, Bank of Scotland, TSB, M&S Bank and the Yorkshire and Clydesdale bank.