Effect of Covid-19 on Travel Insurance

The fallout of the Covid-19 last year was unprecedented. Industries around the world were affected. Companies had to shut down and an unaccounted number of people around the globe was pushed into unemployment. Understandably, the travel industry was one of the hardest hit. People stopped travelling as lockdowns became the norm. Hotels and even restaurants had to shut down temporarily. 

Yes, travel indeed did grind to a halt last year as the central and state governments ordered all non-essential businesses to shut down. It’ll be interesting to note here that as much as 90% of travel went down during the mid-March to mid-May period last year. 

People typically get travel insurance to mitigate certain risks when they are travelling abroad. Mostly, people go for the broadest coverage products which insurance their vacation plan, cancelled trips, lost baggage and medical emergencies. Such insurances are meant for short trips, and this will surely return to normal post-Covid. Right now however, most trips are domestic only. In India, 23% of airline travelers wish to buy travel insurance for travelling during Covid-19. 

Right now, borders are opening up again, which means people are more willing to travel again. Thus, more and more people are looking for travel insurance. The problem is that such insurances are mostly unable to cope with the risks of the pandemic. Insurance companies right now are unable to keep up with the wave of demand for travel insurance. For instance, policies don’t cover expenses that are related to Covid-19 and pre-existing medical conditions. These apply to government-ordered shutdowns, travel bans and Covid-19 medical costs.

This uneven distribution of insurance coverage is confusing customers when they’re looking to buy. 

Some travel insurance companies like the Allianz are now discouraging people from buying travel insurance during this time while others like Seven Corners are giving special coverage just for Covid-19 related costs.

What’s next for the travel industry?

Right now, the travel insurance industry is seeing business fall in the double digits. As you have seen, travel insurance coverage is not doing well since few people are travelling. On the other hand though, since there is also a fall in claim payment, there is some semblance of balance in the industry.

Some airline companies have responded to the pandemic by giving refunds beyond the normal fee lock-in period and even changes in the effective flight date if the insured one postpones and/or reschedules a trip because of the Covid-19. Their strategy is to keep the business going somehow, not cancel their business outright. 

What’s in store for the future?

All is not doom and gloom. After months of lockdowns and quarantine, people are planning their dream vacations. They have had a lot of time to plan their trips and not can’t wait to take them. To encourage this trend, airlines and cruises are giving high discounts to entice people.