Insurance is based on the chances of something unexpected happening to only a portion of the people insured by a company. Modelling by actuaries makes a prediction that only a percentage of people will likely have to make a claim, such as having to cancel their holiday due to illness or injury. Based on this prediction, every traveller is charged much less than the actual cost of the cancellation of their trip, but charged enough so there is enough money in reserve to pay for the unfortunate ones who have to cancel their trip due to illness or injury.
However, as demonstrated with the COVID-19 Coronavirus, the implications of Pandemics can rapidly change and escalate in a very short period of time. Pandemics spread across many geographic areas and affects many people, resulting in a much higher percentage of people being affected and needing to make claims than other unexpected events (for example, earthquakes and other natural disasters). This means that the money each individual is charged may not be enough to cover the cost of all the claims.
To manage such a situation, there are two options for travel insurance companies. The first is to have a General Exclusion for Pandemics and Epidemics in a travel insurance policy, or the second option, which is to substantially increase the price of travel insurance all the time, so that if there is a Pandemic or epidemic in the future, there will be enough money in reserve to cover the costs of all claims.