Living benefit riders to life insurance policies: Pricing considerations and strategy
Adding benefit riders to policies provides meaningful coverage for those who need it, and carriers usually can do so at a relatively low cost.
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.
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.
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:
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.
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.
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, 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 of 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, the customers will expect more protection in 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.
A “new normal” travel insurance would certainly bring challenges to insurers, especially in terms of risk assessment and pricing. While we expect burning costs for perils like baggage, theft and travel delays to remain largely the same, the burning costs for cancellation and medical claims, which are usually the two largest perils, will certainly be impacted.
When travel restrictions are finally lifted, many expect a surge in travellers who have been “housebound” for over 18 months. In some places, travel destinations are gearing up for this. Opportunistic investors have taken over troubled vacation resorts in anticipation. Insurers looking for a significant share of the “new normal” travel insurance market should act now to build brands with comprehensive travel cover.
1Embassy.com (22 September 2021). “No Quarantine” Phuket Sandbox. Retrieved 28 September 2021 from https://www.thaiembassy.com/travel-to-thailand/no-quarantine-phuket-sandbox-plan.
2Embassy.com. Samui Plus Sandbox: Travel to Thailand Without Quarantine. Retrieved 28 September 2021 from https://www.thaiembassy.com/travel-to-thailand/samui-plus-sandbox-travel-to-thailand-without-quarantine.
3Reuters (27 September 2021). Thailand to reopen to more vaccinated visitors from November. Retrieved 28 September 2021 from https://www.reuters.com/world/asia-pacific/thailand-further-ease-coronavirus-restrictions-2021-09-27/.
4Ong, E. (17 September 2021). Langkawi Travel Bubble SOPs: All You Need to Know When Planning Your Holiday. Klook. Retrieved 28 September 2021 from https://www.klook.com/en-MY/blog/langkawi-tourism-travel-bubble-sop/.
5Ng, A. (20 August 2021). Singapore conditionally lifting quarantines for travelers from Germany, Hong Kong, Brunei and Macao. CNBC. Retrieved 28 September 2021 from https://www.cnbc.com/2021/08/19/singapore-to-allow-quarantine-free-travel-for-germany-hong-kong-visitors.html.
6Vincej, V. (20 September 2021). Bali to Reopen for Tourism in October 2021, Says Indonesian Government. Traveling Lifestyle. Retrieved 28 September 2021 from https://www.travelinglifestyle.net/bali-reopening-borders/.
7Reuters (15 September 2021). Langkawi gears up for tourist return, Bali for foreign visitors, amid suggestion of tourism "triangle" with Phuket. Retrieved 28 September 2021 from https://www.scmp.com/lifestyle/travel-leisure/article/3148787/langkawi-and-bali-gear-welcome-back-tourists-amid.
8Chau, M.N. (12 September 2021). Vietnam to Open Phu Quoc for Vaccinated Foreign Tourists in November. Bloomberg. Retrieved 28 September 2021 from https://www.bloomberg.com/news/articles/2021-09-13/vietnam-to-open-phu-quoc-for-vaccinated-foreign-tourists-in-nov.
9Squaremouth (26 August 2021). How COVID-19 Changed Travel This Summer. Press Room. Retrieved 28 September 2021 from https://www.squaremouth.com/press-room/covid-19-changed-travel-this-summer.
10BBC News (11 September 2021). COVID-19: Phuket reports new cases and higher deaths but insist on moving forward "Phuket Sandbox" next. Retrieved 28 September 2021 from https://www.bbc.com/thai/58528595.
12SafeTravel. Mandatory Inbound COVID-19 Travel Insurance. ICA Singapore. Retrieved 28 September 2021 from https://safetravel.ica.gov.sg/health/travelinsurance.
13Embassy.com. COVID-19 Insurance for Foreigners in Thailand. Retrieved 28 September 2021 from https://www.thaiembassy.com/travel-to-thailand/covid-19-insurance-for-thailand.
"New normal" travel insurance: ASEAN in the post-COVID-19 era
We 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.