With the travel sector continuing to dominate the travel insurance market, other providers are fighting for a share of the £576 million sector. The market continues to be driven by convenience, with few consumers taking the initiative to shop around for better deals. Further, failure to take advantage of annual policies is costing many consumers dearly.

Increased competition in the travel insurance market has meant that the average premium per policy has fallen slightly, as new entrants to the sector have sought to gain market share on the basis of price. Consequently the growth in the market has been somewhat suppressed since 1998, as price competition has impacted upon premium income.

Some 68% of travel insurance sales are accounted for by the travel trade in value terms - having declined from 73% since 1998. Increased competition from other distributors such as direct insurers has only had a limited effect upon the distribution of travel cover. Although there are small signs that the travel industry is now reducing rates to retain its overall industry dominance, the market has largely been driven by convenience. According to Paul Davies, Senior Financial Consultant, "Consumer inertia has meant that people would prefer to pay for cover on the spot, rather than shop around in the hope of saving on alternative insurance."

Some 56% of adults arranged their travel insurance via a travel intermediary, ie a travel agent as part of a holiday package (34%) a tour operator as part of a holiday package (14%) or a travel agent on its own (8%). The figure compares to 62% in January 2000, and confirms that there are some signs that the influence of the travel industry in selling insurance is gradually eroding. "Some consumers will book their holiday and insurance at the same time, assuming that they are purchasing the brochure insurance, although they are actually buying the agent's product, with the substantial commission going to the high street retailer" comments Paul Davies.

Consumer research points towards the insurance buying process being very gradually "unbundled" from the holiday-booking process. The proportion of respondents agreeing that it is more convenient to buy travel insurance when booking the holiday has fallen by two percentage points to 38%. However, this still represents a sizeable minority of the sample.

More encouraging for direct sellers and new entrants is the fact that some 29% of the sample felt that it was now worth shopping around on the basis of price, an increase of seven percentage points on the previous year. The price advantage of these providers over agents and operators should ensure that they capture more new business. One in five respondents agreed that it was easy to shop around for travel cover today, a rise of three percentage points since 2000.

Channels such as the Internet, digital TV, and Teletext may eventually take some business away from the high street holiday retailer. However, this is unlikely to be significant in the medium term as many consumers still demand the face to face approach when booking something as relatively important as an annual holiday.