By Ken Lim, Tananya Santipinyolert, and Tharan Ganesan of Milliman Consultants
No insurance product has been as adversely affected by the COVID-19 pandemic as travel insurance. Travel and social restrictions both within and without countries were introduced and are still in force in an effort to curb the spread of the virus. With the lack of travel came a precipitous drop in travel insurance premium volumes. However, global vaccination rollouts have provided a glimmer of hope for worldwide travel, sparking a conversation on the evolution of travel insurance in a post-pandemic world. In the following sections, we aim to explore how ASEAN countries have been gradually opening up their borders, along with the progress shown by insurers in the region to adapt to the evolving situation and its repercussions for the travel insurance products of tomorrow.
ASEAN countries are opening up slowly
It has been over 18 months since countries implemented lockdowns and foreign tourists were banned from visiting. As a result, global tourism and travel insurance markets have taken a big hit from the COVID-19 crisis. There is no clear vision of when these markets will fully recover. However, certain parts of the region are slowly reopening. Below is a snapshot of travel arrangements allowed in some of the key ASEAN countries, at the time of writing.
Thailand: The “Land of Smiles” relies heavily on the tourism industry and is among the first ASEAN countries to welcome fully vaccinated tourists (without quarantine) through the Phuket1 and Samui2 sandboxes. Recently, it has also been announced that more destinations will welcome fully vaccinated tourists from 1 November onwards3. Bangkok
is one of them.
- Malaysia: The government launched a domestic travel bubble allowing vaccinated Malaysians to travel to Langkawi from 16 September onwards4 but there is still no plan to receive international tourists.
- Singapore: The city-state had plans to experiment with a travel bubble arrangement with Hong Kong as early as November 2020, when vaccination rates were still low. However, the arrangement has been abandoned. Recently, Singapore allowed a quarantine-free entry for vaccinated travelers from selected countries like Germany and Brunei 5.
Indonesia: After several attempts to reopen, Bali has postponed plans to reopen to tourism due to rising COVID -19 cases in the island. Recently, Bali announced it would attempt to launch another travel corridor6 with Indonesia’s tourism minister raising the idea of a tourism “triangle” involving Phuket, Langkawi and Bali.7
- Vietnam: Phu Quoc Island will be the country’s first tourist destination reopening to fully vaccinated foreign visitors starting November 2021.8
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Insurers’ responses to COVID-19 so far
Insurers in ASEAN have reacted slightly differently to the COVID-19 pandemic with regards to travel insurance. It is promising that we have seen insurers extending coverage to include COVID-19 in
the following instances:
In Thailand, all general insurers are providing COVID-19 medical expenses coverage as a part of their travel products at the requirement of the regulator. In addition, there are initiatives observed in the market to ease the burden of travelers during the pandemic. These initiatives include allowing the postponement of the policy effective dates and the cancellation of policies if a planned trip fails, as well as an extension of the coverage period.
Several insurers in Singapore, Malaysia, and the Philippines have added comprehensive COVID-19 coverages to travel insurance, through ‘add-ons’ or via extending the coverage. These coverages differ across insurers, but generally include (and are not limited to) medical expenses, daily cash benefit upon quarantine, repatriation
and trip cancellations, subject to terms and conditions.
On the other hand, a majority of insurers are yet to provide coverages against any travel insurance claims caused by COVID-19 infections or have halted COVID-19 claim payments when the outbreak was officially announced as a pandemic.
Most insurers in Malaysia still have exclusion clauses related to any communicable or contagious diseases or pandemics declared by the World Health Organisation (WHO).
Some insurers in Singapore that had previously paid cancellation claims due to COVID-19 ceased the coverage later through exclusion clauses related to “known events” or “communicable disease.”
Given the lack of international travel in the region, companies shifted their focus towards domestic travel insurance through direct and affinity channels in an attempt to save their toplines. Some companies in the region even started offering domestic travel insurance on an annual basis, which was not offered conventionally during the pre-pandemic times.
Future opportunities, but travel insurance products are not quite ready
Countries like Thailand, Singapore and Vietnam are requiring travelers to have mandatory travel insurance covering necessary medical expenses related to COVID-19 as part of their travel bubble initiatives. We expect more countries and even players within the tourism industry, such as tour companies and cruise operators, to follow suit in the future. Hence abolishing pandemic-related exclusions, at least for COVID-19, will become the new normal.
Traveling during the pandemic is stressful, with more than a desirable level of uncertainty. Sudden border closures, the emergence of hotspots, and the propensity for COVID-19 infections before or during trips, as well as unforeseen rescheduling of flights, have a greater likelihood of causing disruptions to travel plans than before. Due to this, the COVID-19 pandemic has directly increased customers’ awareness of the need for insurance protection, and we believe that this heightened awareness for travel insurance will likely continue even after the pandemic is declared over (or reclassified as an endemic).
In the future, customers will expect more protection from travel insurance products to help mitigate the burden from similar crises like the COVID-19 pandemic. This implies that they will expect more comprehensive coverages related to trip cancellations and will have more willingness to accept premiums that reflect the higher protection. Indemnity for cancellation or curtailment due to contracting COVID‑19 will be a must. In some case studies, we have also seen proven surges in demand for even more flexible coverages for cancellation, aka the ‘cancel for any reason policies. Statistics from travel insurance comparison websites in the United States, such as Squaremouth, show that the demand for travel policies with ‘cancel for any reason protection has grown more than fivefold from summer 2019
to 2020.9 We believe that ASEAN consumers are likely to have similar needs as they are not isolated from the travel disruption introduced by the pandemic. Although this coverage type is rarely seen in the ASEAN market, it would be interesting to see what would happen if insurers started enhancing their existing travel insurance products to capture the potential new opportunities after COVID-19.