Vol: 43 Issue: 3 | Oct 2020
When Qantas chief executive Alan Joyce cut at least 6,000 airline jobs due to COVID-19 back in June, he warned of a long and challenging road to recovery for the global travel industry.
The airline’s international flights were unlikely to resume ‘in any real size’ until July 2021, he stated, adding that all airlines were ‘in the middle of the biggest crisis our industry has ever faced’.
COVID-19 has grounded the global travel industry.
Research from the World Travel & Tourism Council estimates that prolonged pandemic restrictions could jeopardise more than 197 million jobs in the sector and wipe off more than US$5.5 trillion from global GDP.
The flow-on effect for travel insurers has been both swift and severe with sudden cuts to revenue and a spike in customer complaints, leaving the entire industry wondering ‘what does the future hold?’.
HOW TRAVEL INSURERS RESPONDEDThis question was addressed in a recent ANZIIF webinar, Grounded: Will Travel Insurance Ever Recover?, which was presented by New Zealand-based actuary and principal at Taylor Fry, Win-Li Toh.
Toh outlined the challenges facing the industry and noted that insurers who are ‘treating their customers well’ will be among those who make it to the other side.
However, insurers may have some work ahead of them.
Of the approximately 1,000 COVID-19-related general insurance complaints received by the Australian Financial Complaints Authority up until 27 May, almost 900 related to travel claims, such as insurers refusing to cover COVID-19 losses or provide refunds for changed or unused trips.
SHOULD TRAVEL INSURANCE COVER PANDEMICS?Toh notes that recovery for the travel industry requires more than just the reopening of borders. She says that people will not only need the desire to travel again, but also the financial resources with which to do it.
The cost of airline travel, for example, is expected to increase when lockdowns are lifted. Toh says if pandemics were to be included in travel insurance, this would also ‘come at a cost’.
‘If you don’t charge enough, then the solvency of travel insurers is at risk,’ she says. ‘If you charge too much, people simply can’t afford it.’
Most travel insurance policies don’t cover claims made in relation to pandemics after they have been deemed a ‘known event’. Some insurers have also changed their terms to exclude pandemics.
Aimee McGuinness, chief underwriting officer at Allianz Partners, says the insurance industry must consider whether exclusions are going to be feasible in the future.
Allianz, like many travel insurers, temporarily ceased sale of new domestic and international travel insurance policies in March this year.
‘If you said to me last year that the entire office would be working from home,
I wouldn’t have believed you,’ she says. ‘Similarly, we are exploring changes to our product to adapt to our ever-changing world.’
WHICH TRAVEL INSURERS WILL BE LEFT STANDING?Toh labels the travel insurers that will survive the crisis as ‘agile innovators’ — embracing new technology, developing more personalised offerings and learning from more engaged customers.
Even before the pandemic, she says, many insurers were looking to innovate and adapt their model.
‘The Hayne royal commission findings caused many insurers to look at how they operate,’ she says. ‘A lot of innovation, thinking and discussion was taking place about developing the best products for different groups of customers.’
In Singapore, for example, Chubb teamed up with mobile technology company Grab to allow users of the Grab app to buy travel insurance ‘any time and anywhere’.
When announcing the partnership in January 2020, Chubb’s country president for Singapore Scott Simpson said the initiative would allow Chubb to ‘develop more customer-centric insurance solutions that align with the varied lifestyles of consumers’.
In Australia, nib Travel chief executive officer Anna Gladman says the insurer is looking at ways to make disclosures more user-friendly.
‘Gamification of the acceptance of terms and conditions was one of the first ideas raised when we started looking at the post-COVID environment,’ she says.
‘For example, a few simple questions, such as “Does this policy have a general exclusion for pandemic? Yes / No”, [would need to be] answered correctly before the buy button becomes active.
‘It enhances our customer-centric approach in an environment where travellers are eager to get a deeper understanding of coverage.’
HOPE FOR THE FUTURE OF TRAVELGladman believes insurers will rise to the challenge of COVID-19.
‘We’ve been in a similar position before,’ she says. ‘Following the Bali bombing in 2002, right through to as recently as the Brussels train station attack in 2016, coverage for acts of terrorism was top of mind for travellers.
‘Insurers responded in a variety of ways to restore confidence in their products and, more importantly, provide reasonable, fair-priced solutions to travellers. Over the coming months and years, we’ll see similar changes in response to coronavirus.’
While the industry must adapt to change, Toh notes that consumer appetite for insurance may increase in a post-COVID world.
‘After the 9/11 attacks in New York, [demand for] travel insurance actually increased sharply worldwide,’ says Toh. ‘People react to world events, looking for protection and security.
'So, even if people travel a third as much as they did before but three times as many buy travel insurance, then we’ll end up with the same income.’
Toh’s optimism extends even further. ‘I’d venture that we could end up with a better outcome,’ she says.
‘We’ll reduce our impact on the planet with less air travel and, at the same time, we can provide a better, tailored and more responsive product that people are more engaged with and really want — a product that helps them, without loopholes, without fine print, without arguments.’
TRAVEL INSURERS RISE TO THE CHALLENGEDespite the surge in travel insurance complaints in recent months, there have also been some good news stories.
When the Diamond Princess cruise ship was placed under quarantine in Yokohama in late February following an outbreak of COVID-19 onboard, two passengers had travel insurance with Allianz Partners Australia.
During their four-week isolation and treatment period on the ship and in hospital, the passengers received daily welfare check-in calls from Allianz’s nurses and case managers to monitor their physical and emotional wellbeing.
Andrew Wareham, Allianz’s regional head of medical operations, Asia Pacific, says the insurer also expedited a hospital cash allowance for necessary provisions while the customers were being treated and made sure they had their standard medications available to them.
‘We also faced a lot of ambiguities,’ says Wareham, ‘but our message to our customers was always clear — that no matter what, we were there to support them emotionally and psychologically and ensure that everything that needed sorting out would get sorted out.’
SUPPORTING CUSTOMERSAt AXA Singapore, extra effort was made to support customers prior to COVID-19 being declared a global pandemic.
Julien Callard, AXA Singapore’s managing director, retail & health, says the company began offering a full premium refund to customers who requested the cancellation of their travel policy, and also waived the penalty fee if customers wanted to cancel their upcoming trips due to the crisis.
‘In addition, to provide more support during this period, we cover trip cancellation claims for healthcare frontliners who have to cancel their trips, irrespective of the date of the trip and travel insurance policy purchased,’ he says.
‘Our individual customers, including travel insurance customers, are also entitled to free COVID-19 coverage.
'Customers who are hospitalised due to COVID-19 receive a cash benefit of S$200 per day of hospitalisation, up to a maximum of 90 days and, in the event of death due to COVID-19, a S$20,000 lump sum will be paid out. Customers who are frontline healthcare workers receive double the protection.’