Greater clarity over refunds and the UK’s Covid-19 track and tracing system is required if insurers are to offer cover for cancelled holidays, according to experts.

Speaking in a special Travel Weekly Roadmap to Recovery webcast, insurance providers welcomed medical and repatriation cover returning to the market.

But they said cancellation cover is key to stimulating the market by giving holidaymakers the confidence to book knowing that if they have to cancel they will get their money back.

Currently many operators are offering flexible booking terms in the absence of cancellation cover.

Insurance broker Rock Insurance has begun a consultation with the travel industry so it can work with underwriters to provide the policies partners are demanding.

Antony Martin, Rock managing director, said the insurance sector and the travel industry must work collaboratively to plug the gap for cancellation cover.

He said the refunds issue had “muddied the waters” with some agents passing customers on to their insurance companies only for them to be passed back to their travel company.

“The insurance sector and the travel industry have always worked well together, but now more than ever we need to collaborate and really understand who’s providing what,” he said.

“We probably could get cover for cancellation, fairly soon, but if the Foreign Office puts another lockdown in place it would be up to the travel agent or tour operator to move that holiday.

“As long as everybody knew what was going on and everybody could agree on who was doing what, and when, then we could probably get the cover in place faster.

“There’s lots of small things that are creating a huge problem that need to be unpicked one at a time and as those things are unpicked I’m sure insurers will take a much more flexible view on the cover they provide.”

Martin said ongoing uncertainty over the UK’s two-week quarantine rule and how track and trace and testing for Covid-19 is working is putting insurers off providing cover.

“What’s going to happen over time is the insurers will gain confidence to offer some element of cover for cancellation,” he said.

“The problem we’ve got right now is we are having to work with travel agents and tour operators to give people the confidence to book again.

“It will sort itself out over time, but we can’t give an accurate time frame and I’m not seeing a great deal of appetite from insurers for this sort of product.”

Saga has recently announced the introduction of Covid-10 cover for medical expenses and repatriation while travelling, but is still unable to cover for cancellations.

Kevin McMullan, Saga head of product for travel and insurance, said: “We continue to explore cancellation cover, but it is challenging given the uncertainty and the role of the travel agent and tour operator and all the different flexible cancellation terms that are available.

“We have a great relationship with all of our underwriter partners, but there is that uncertainty at the moment and it’s hard to provide value for customers, but it is something we continue to explore.

“We are offering peace of mind and flexible guarantees for our holidays and given that when they do travel they’ll have that cover for medical treatment abroad we are seeing some green shoots.”

More: Travel insurance brands extend cover for Covid-19 cancellations