The Curious Incident of the Travel Insurance

Rachel and I recently bought travel insurance from World Nomads. If you’re going on a round the world trip for a year, it’s good to have some emergency measures right? Here’s the strange thing, the cheapest insurance to buy in terms of monthly average is the 6 month policy. Anything more or less is pricier. Look at this chart.

As you can see, the price steadily decreases until it gets to 6 months, then it shoots up again. How could this pricing structure be rational? Here are some of my ideas.

• The company makes a lot of money off of people who are unsure how long they are going to travel. Many of these people can be enticed to ‘play it safe’ and buy 6 months of insurance (more than they need), but generally not more.
• Long term travelers are actually more risky investments. Up to the six month mark you get a bulk discount, but more than that and you’re signalling to the company that you do a different kind of extra risky travel.
• They advertise that you can renew your policy on the road. Assuming they are allowed to reject you for any reason, this gives the company an opportunity to weed out the most expensive clients every 6 months.

What do you think? Any other ideas?