Underinsured Travel Risks: A Lucrative Niche for Insurance Innovation and Investment

The global travel insurance market is undergoing a transformative shift, driven by evolving traveler behavior, technological advancements, and a growing recognition of underinsured risks. As international travel rebounds post-pandemic and digital platforms democratize access to tailored coverage, niche insurers are capitalizing on gaps in standard policies-particularly for risks like moped accidents, intoxication-related incidents, and political instability. These overlooked segments present a compelling investment opportunity, with market dynamics and financial trends underscoring their potential.

Market Growth and the Rise of Niche Coverage

The global travel insurance market was valued at $27.14 billion in 2025 and is projected to grow at a compound annual growth rate (CAGR) of 15.43%, reaching $98.74 billion by 2034. In the U.S., the market is expanding at a CAGR of 14.4% from 2024 to 2030, fueled by a surge in demand for policies addressing specific risks such as trip cancellations, medical emergencies, and high-risk activities according to industry data. This growth is not merely a function of increased travel but reflects a deeper shift: travelers are prioritizing comprehensive protection against scenarios that traditional insurers often exclude or underprice.

For instance, the rise of "Cancel for Any Reason" (CFAR) policies-despite their higher premiums-demonstrates a willingness to pay for flexibility and broader coverage as reported. Similarly, the integration of travel insurance with non-insurance services, such as emergency medical evacuation and travel assistance, is expanding the scope of protection according to market analysis. These trends highlight a market in transition, where personalization and technological innovation are redefining risk mitigation.

Underinsured Risks: A $98 Billion Opportunity

Standard travel insurance policies frequently exclude or inadequately cover risks that are increasingly material in a volatile world. Three key areas stand out:

1. Moped and Scooter Accidents:
   Niche insurers like World Nomads offer tailored coverage for motorbike-related incidents, including medical expenses and emergency evacuation. However, such coverage is often limited to specific plans (e.g., World Nomads' Epic Plan) according to policy details. With urban mobility trends and adventure tourism on the rise, the demand for specialized coverage in this segment is poised to grow.

2. Intoxication-Related Incidents:
   Most policies exclude alcohol-related claims, such as injuries from falls or denied boarding due to intoxication as standard practice. While this exclusion remains standard, niche insurers could innovate by offering add-ons or tiered coverage for travelers seeking protection against such risks-a gap that could attract a premium segment of the market.

3. Political Instability:
   Political unrest, civil strife, and travel warnings are increasingly influencing destination choices and trip disruptions. Squaremouth, a leading comparison platform, has expanded its partnerships to include insurers like Seven Corners, which now offer non-medical evacuation coverage for political events up to $10,000 according to platform reports. This addresses a critical need for travelers in high-risk regions, where standard policies often fall short.

Niche Insurers: Filling the Coverage Void

Companies like World Nomads and Squaremouth are at the forefront of addressing these gaps. World Nomads, for example, leverages AI-based tools to assess risks and customize policies, enabling coverage for high-risk activities like motorbike racing as demonstrated. Squaremouth, meanwhile, has broadened its marketplace by partnering with niche insurers such as Tin Leg, battleface, and Aegis, offering tailored solutions for cruise trips, multi-trip coverage, and political instability according to partnership announcements.

Financial data further validates their strategic positioning. In 2025, Squaremouth reported that 48% of travelers cited flight delays or cancellations as their top concern, while 33% prioritized emergency medical coverage according to survey results. These metrics underscore a market where travelers are willing to pay for specialized protection, even as average trip costs rise by 11% year-on-year as observed.

Financial Implications and Investment Case

The financial impact of underinsured risks is substantial. For example, the average premium for travel insurance in 2025 remained stable at $285.39 for trips averaging $6,917, but the cost of claims for underinsured events-such as political evacuations or moped accidents-can be far higher according to claims data. Niche insurers that effectively price these risks and scale their offerings stand to capture significant market share.

Investors should also consider regulatory tailwinds. The U.S. Department of State actively promotes travel insurance for medical emergencies and trip cancellations, reinforcing its importance as stated. Additionally, the integration of digital platforms and AI-driven underwriting is reducing operational costs and enabling faster, more accurate risk assessments-a competitive edge for agile niche players.

Conclusion: A Call to Action for Investors

The travel insurance sector is at an inflection point. As travelers demand more comprehensive and personalized coverage, niche insurers are uniquely positioned to fill the void left by traditional providers. With the global market projected to nearly quadruple by 2034, now is the time to invest in companies that are redefining risk mitigation for the modern traveler.

For investors, the message is clear: underinsured travel risks are not just a market gap-they are a $98 billion opportunity waiting to be unlocked.