AI, Capacity, Regulation: The Pressure Points Set to Reshape Travel Insurance in 2026
Three forces are colliding in travel insurance: AI is moving to the front line, insurance capacity is tightening, and regulatory pressure is intensifying. The result is a hard reset on how products are built, priced, and serviced.
Industry veteran Carl Carter has called out this shift clearly: 2026 rewards the carriers and partners who move fast on governance, simplify their footprint, and rethink value at claim time.
AI is moving from back office to decision-maker
AI is no longer just a productivity tool. It's guiding underwriting, communicating with customers, and influencing outcomes in real time. That opens the door to smarter products and faster service-and exposes firms to new model, data, and conduct risk.
Treat AI as a material risk. Every model needs an accountable owner, version control, monitoring, and a clear audit trail. Bias, mispricing, weak data provenance, and privacy exposure will draw scrutiny-especially when automated decisions affect claims or pricing.
There's a bigger strategic concern too: hyper-personalised underwriting can over-segment customers and erode the basic purpose of pooling risk. The commercial edge won't come from the quickest rollout, but from safe, explainable, and fair deployment.
- Stand up model risk governance: inventory, validation, challenge, and kill-switches for every AI model.
- Document data lineage for third-party feeds, cloud workflows, and internal sources; remove unapproved data.
- Run bias and stability testing on pricing, triage, and claims models; publish guardrails to the business.
- Keep a human-in-the-loop for high-impact decisions and give customers clear routes to contest outcomes.
- Build for auditability: log prompts, inputs, outputs, overrides, and escalation paths.
Capacity squeeze and retrenchment
Several carriers are stepping back from small schemes and fragmented partnerships. The driver isn't just profit-it's operational drag. Rising claim severity and comparison-site discounting have compressed margins while commission and distribution costs bite.
Aggregator standardisation makes it tough to compete on value. Features blur, price wins, and differentiation shrinks. Expect more focus on fewer, larger partnerships, modular product stacks, and sharper pricing in high-cost geographies and older age bands.
- Simplify portfolios: fewer SKUs, cleaner tiers, add-ons that actually move loss ratio.
- Reprice by corridor and cohort (destination risk, seasonality, medical cost inflation) with transparent rationale.
- Trim long-tail micro-schemes; double down on partners that share data, invest in service, and co-own outcomes.
- Model commission and CAC with full claims and operational overheads-then reset distribution mix accordingly.
Regulation: tighter oversight and higher expectations
Regulatory attention is intensifying. Proposals tied to consumer outcomes and scrutiny from groups like Which? are pushing firms to raise the bar on transparency, fairness, and claims handling. The risk: higher premiums for riskier segments, narrower cover, or product withdrawal if costs outrun price.
Misrepresentation, non-disclosure, and rising medical costs are already straining profitability. Add tighter conduct expectations, and weaker operators will struggle. Reputational pressure will grow as declined claims hit headlines. Expect more weight on claims outcome data (e.g., Claimsrated.com, Claimscore.co.uk) over storefront review scores.
- Map Consumer Duty outcomes to every step: quote, sale, post-sale support, and claims.
- Rewrite disclosures and medical screening flows for clarity; remove trick questions and dead-ends.
- Tighten delegated authority oversight and claims governance; measure time-to-resolution and upheld rates.
- Publish simple summaries of coverage, exclusions, and typical claims scenarios; reduce surprise denials.
Claims model reset: from "pay or decline" to recovery-led
Writing off the full value of a cancelled trip is getting harder to justify-especially if a travel provider resells the same arrangement. A third path is emerging: recover value through digital resale and travel arrangement salvage.
This approach doesn't replace underwriting or claims decisions. It reduces net claims cost while offering customers a constructive outcome. Think partial payouts, credits, or resale proceeds applied against the claim.
- Build resale and salvage partnerships with clear APIs, SLAs, and value-sharing mechanisms.
- Adjust policy wording to enable recovery pathways; be explicit about timelines, consent, and customer options.
- Report net impact: recovery rates, customer satisfaction, and reputational lift from "helped me salvage my trip."
Your 2026 operating playbook
- Governance first: AI model risk controls, explainability, and human oversight by default.
- Portfolio focus: fewer products, modular design, and pricing that reflects real corridor risk.
- Distribution discipline: rebalance away from pure price fights where commissions erase margin.
- Claims credibility: measure and publish outcomes; prioritise fair resolutions over short-term deflection.
- Recovery economics: embed resale/salvage to cut loss cost without eroding customer trust.
- Data ethics: curb over-segmentation that undermines pooling; monitor protected-characteristic impacts.
If your teams need practical upskilling on AI model governance, data controls, or prompt-risk playbooks, explore training options at Complete AI Training.
For regulatory context and expectations on conduct and data use, see the FCA's Consumer Duty and the ICO's guidance on AI and data protection.
The firms that tighten governance, simplify where it counts, and recover value at claim time will keep optionality. Those that delay will face thinner margins, fewer partners, and limited room to move.
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