With a growing middle class and their propensity to travel due to increasing disposable incomes and cheaper airfares, travelling has become a common affair for most of the people. However, travel insurance, which should be one of the most important components of anyone’s travel plan, is growing at a snail’s pace currently due to lack of awareness. Although international air traffic is growing at around 5-8 per cent and domestic travel by 15-20 per cent, penetration of travel insurance is estimated at just around 20 per cent for leisure travellers abroad.
The recent incidents such as the Uttrakahand floods, however, have created a buzz, and industry experts believe that travel insurance should now grow faster in the next five to seven years. This is also owing to the fact that the growth of the online ticketing platform, cheaper airfares and online insurance offered by various general insurance companies has led to a growing awareness of the need for protection while on the road. In India, around 70 per cent of travel insurance is distributed through travel agents, about 20 per cent through individual multi-line agents and brokers and approximately 5 per cent through airlines, a report revealed.
Current scenario
According to S S Gopalarathnam, Managing Director, Cholamandalam MS General Insurance, India’s market share of the global travel insurance market pie is in the range of 8.4 – 9 per cent. “The global travel insurance market is expected to be at around US$ 10 billion in the year 2013-14. The Indian travel insurance market is pegged at around US$ 820 million in 2013-14. This market was US$ 5.9 billion worldwide in 2010 and India was at US$ 480 million in the year 2010, with a market share of 8.4 per cent of the global travel insurance market,” Gopalarathnam said and added that the Indian market is predominantly dominated by single trip travel insurance product consumption.
Giving more details on the Indian travel insurance sector, he revealed that more than 160 lakh single trip travel policies are sold on an average in a year and is growing at 20 per cent rate. “The average ticket cost of single trip is at around Rs.1, 500. In India, on average, around 45,000 travel insurance policies are sold in a single day. Travel operators contribute to more than 75 per cent of the travel insurance being sold in India, followed by Airlines – 10 per cent and online travel portals – 8 per cent. The remaining 7 per cent are spread across ferry operators, railway operators and student travel agent,” Gopalarathnam informed.
It is mainly the overseas travellers who opt more for the travel insurance. However, they are also opting for travel insurance when it becomes necessary. “The overseas travel insurance market is very small but has been growing steadily as more and more people have started travelling overseas, either for work or leisure. The percentage of people travelling abroad has risen considerably, but those taking an insurance cover are very less. People insist on travel insurance only when it is mandatory like in case of Schengen Visa,” Vikramjeet Singh, Head – Travel Insurance, Bajaj Allianz General Insurance, said.
According to him, people travelling in parts of Asia or South East Asia generally do not consider having an insurance cover though Bajaj Allianz has a very low premium rate for that geography compared to normally higher premiums for US or UK. “They do not realise that travel insurance is as necessary as any other travel accessory in order to ensure that your travel either for business or pleasure is safe from any travel related emergencies like loss of passport, hospitalisation, loss of baggage and so on. What one should remember is travel insurance premium is a small fraction of the total travel related expenditure,” Singh added.
Amit Madhan, COO – IT, E-Services & Insurance, Thomas Cook (India), also feels the same. “India is certainly witnessing a boom in outbound travel with over 4.8 million people travelling abroad each year; yet not all our international travellers purchase travel insurance. Insurance penetration in the western geographies and Japan is almost 100 per cent, whereas in India it is limited to a mere 20 per cent for international travel and practically negligible for domestic. Our data indicates that the travel insurance industry is growing at the rate of 20-25 per cent annually,” Madhan said.
Ravi Menon, Vice President, Forex and Insurance, Cox & Kings, said that about 70 per cent of those travelling overseas buy a travel insurance whereas close to 30 per cent of those travelling within India avail of a travel insurance. Dev Karvat, Managing Director, TrawellTag, pegs the size of the Indian travel insurance market at Rs 450 crores. “The fraction of people opting for travel insurance while travelling abroad is approximately 20 per cent. As an industry it has extreme potential and we can educate our customers in the need and importance of travel insurance,” Karvat said.
Importance of travel insurance
Travel insurance is a pre-requisite for overseas travel in most of the countries. In some countries, visa issuance will not happen until it’s in place. Notwithstanding, in case of emergency health situation/ treatment requirements, most foreign countries do not entertain or give access to health care/ hospitals without a valid travel insurance. “Insurance ensures that all treatment related costs are paid for, since the cost of such healthcare is usually very expensive and a traveller may not be able to afford the same,” Gopalarathnam said.
Singh further opined that it is very important that, when travelling to an unknown country one should have an adequate protection against emergency situations such as medical assistance, loss of passport or misplacement of baggage. Karvat supports their argument. “Since the cost of healthcare is very expensive in most developed countries and it is likely that it would incur considerably high costs. Hence, it is imperative that one always travels with adequate travel insurance, one which includes all the necessary expenses,” he stated.
Selecting a travel insurance
Select a policy that covers your specific vacation activities. Some travellers may enjoy skiing in the snowcapped terrains or scuba diving in the ocean. In such a case, you may require a special policy that covers these unique vacation activities. A regular policy might not be an adequate cover. According to Gopalarathnam, travellers/customers should know the product they buy, product inclusions and exclusions, how to proceed in case of a claim, whom to call, how to submit documents etc while selecting a plan.
“Categories by and large include cover on personal accident, health and liability section. Having decided the category, selecting the right sum insured based on their age and stay is the next big step. A travel insurance plan is designed to give coverage/ protection from all possible risks one a trip,” Gopalarathnam stated.
Singh also echoed this opinion. “There are certain things to look for while selecting an insurer and your choice should not be based only on premium but on services they offer. Firstly, the insurer should be a recognised player and should be valid abroad. The next is the claims settlement record of the company which is easily available in their respective websites, convenience in getting a policy like online facility, the service providers abroad if any or whether it is managed in-house as Bajaj Allianz does, whether promised covers have been included in the policy schedule and the network of the tie-ups with the facilitators and agencies abroad for handling any emergency,” Singh said.
According to him, the travel policy gives reimbursement for any unanticipated cost on the trip too. “Some of the common aspects covered by the policy include cover for trip delay, loss of baggage or travel documents, delay of baggage, medical emergencies, legal liabilities etc. It would always be prudent to make sure that basic aspects are covered. While few factors in the policy may seem less important but one must make sure the covers that matter are provided,” Singh said.
Karvat feels that the travel insurance should not only cover hospitalisation charges but it should include all the risks that one could be exposed to, before and while travelling. “Situations may arise where one may need to cancel your trip due to an unforeseen reason where one may miss his connecting flight. Most people travelling abroad participate in many adventure sports. Hence, it is important that all factors are taken into consideration and are included in one’s policy for a stress free travel,” Karvat said.
Scenario in domestic market
Insuring domestic travellers will be the next thirst area for general insurers. Currently, insurer’s travel portfolio primarily caters to international travellers from the country. They are now shifting the focus to domestic travellers as there is an increase in domestic traffic. Singh opines that domestic travel insurance is still lesser than that of overseas travel insurance despite insurance companies are offering exclusive package for domestic market. “Bajaj Allianz has a comprehensive domestic travel insurance branded as Swadesh Yatra, which is the most comprehensive and includes all the risks during the domestic travel,” Singh said, and added that the policy covers personal accident in case of accidental injuries resulting in death or permanent disability, accidental hospitalisation, emergency medical evacuation, repatriation of remains, personal liability and daily hospitalisation allowance. Moreover, the policy would also give travellers an option of additional cover such as accommodation charges due to trip delay of rail/air, loss of air/ rail ticket, family transportation, replacement of staff during a business trip, missed departure. According to him, disasters such as the recent one in Uttarakhand are grim reminders of the need of insurance for their assets or health. However, it cannot be said that these events would boost domestic travel insurance as the awareness of having insurance itself is very low, Singh opined.
Gopalarathnam also feels that domestic travel insurance has not picked up steam yet across all GI companies. “Usually, this product is sold through a tie-up with travel portals or through agents. More over the average ticket size of a domestic travel insurance product is very low – as low as Rs.100 to Rs.130,” he said and opined that the likes of the Uttarakhand disaster could lead to enhancement of the current domestic travel insurance product. Moreover, companies could re-position this product as an annual domestic travel insurance product or can also explore as a lifelong product that will cover people during times of local travel undertaken by trains/ buses/ flights- from one town to another town.
“The ticket size of the premium will also get a boost if the above step is taken and as a result GI companies can become more aggressive in pushing this product further in the market,” Gopalarathnam added. Menon also opines that travel insurance is gaining in importance especially in the outbound market. “Our experience has been mixed. Those who travel overseas take an insurance cover as they understand the need to take precaution while travelling to an overseas destination. Also, European countries and USA insist on travel insurance for even issuing a visa to their destination. In the domestic market, however, travellers flatly refuse to take insurance as they feel it is not necessary. Basically, they need to be educated more on the importance of travel insurance,” Menon said.
Karvat feels that domestic travel insurance may just get a new lease of life in the wake of the recent Uttarakhand disaster. “Most people feel that they don’t need travel insurance as they are travelling in their own country and will get the necessary help. Creating awareness and having an effective distribution we expect a rise in the purchase of domestic policies,” he added.
Impact of rupee devaluation on travel insurance
The falling rupee is likely to increase the cost of general insurers by an average 8-10 percent in settling travel claims, according to industry players. “There is volatility in rupee value over the past few months. It does affect the claims as it has to be paid in foreign currency especially in case of medical emergency or hospitalisation expenses. But we are trying to hold it and absorb as much as we can. However, if it continues over a long period, we may have to relook at the premiums,” Singh said.
Gopalarathnam stated that there could be more rupee outflow in the case of claims, since the sum insured is usually in US$ and the rupee has crashed against the dollar. Madhan also sees a potential increase in the premium rates for the travel insurance segment with the depreciating rupee. “Insurance is low on the priority list for outbound travellers on a short tour, as also for the volume budget segment, and hence usually given a miss. In the Indian psyche, insurance is seen as a non-essential item, and both the insurance and travel industry have much homework to do on creating awareness on the intrinsic value of travel insurance,” Madhan said.
Karvat said that the growth of travel insurance directly depends on the number international travellers. “The rupee devaluation has forced some people to either defer or cancel their international trips and hence the travel insurance sales have not grown as expected in this summer. Moreover, all the travel insurance claims are paid in US$ and will directly impact the claim costs of insurance companies,” he revealed.
Challenges in selling travel insurance
The primary challenge is awareness. “Travel insurance is availed to take care of unforeseen risks and situations whilst travelling. Travellers often assume that nothing will go wrong as the holiday is planned and hence do not feel the need to avail travel insurance,” Menon said, adding that they feel that insurance companies promote the product as it benefits them. “What they don’t realise is that in case of any unforeseen incident overseas, it is the insurance cover that will enable them to even get admitted to a hospital and the money spent on buying travel insurance is small compared to the expense they would have had to incur,” Menon added.
However, Madhan opined that with increased awareness and Consulate visa mandates, Thomas Cook (India) has certainly faced fewer challenges while selling travel insurance. “While the customer is aware of the numerous products available in the market, he certainly requires in-depth explanation and understanding of the products and the claim process. A crucial factor is assurance of support being available in a foreign land in case of unforeseen eventualities,” Madhan opined.
According to Biji Eapen, President, IATA Agents Association of India, Indian market is still not well versed with the diversity of the insurance industry as most people are not used to paying premiums in order to alleviate the risks. “Many Indians consider these rates exorbitant thus they don’t seek insurance. Passengers travelling on business always prefer to take full coverage. Comparing with tourists, traveling on pleasure trips, majority ignore travel insurance coverage as they do believe that within their short span of time, they may not be able to get all clearance or endorsements from the concerned medical departments in a foreign country,” Eapen said.
He further added that many Indians don’t have enough trust in the insurance business – a majority due to the number of non-paid claims. “Many claims have not been paid or settled due lack of transparency in terms and conditions. This lead customers losing their money in the process and thus making the public lose trust in the industry,” Eapen opined.
Abercrombie & Kent India, which specialises in high-end tailor made journeys to both emerging and established international destinations, said that Indian insurance companies do not cover high value trips. “The trip cancellation coverage offered by regular travel insurance is around US$ 1000 – 1500 max and it does not cover the risk for high value trips as mentioned above. We spoke to a lot of active insurance players in India and none have a product to cover high value trip cancellation,” Amit Kalsi, Vice President – Private Travel, Abercrombie & Kent India, said. This is despite the fact that the clients are willing to pay a higher premium on such trip cancellation policies which ranges from 8-10 per cent (as per international standard) of the file value to be able to get trip cancellation coverage for their high value trips.
Claim settlement process
For Thomas Cook India, a majority of the claims received from travellers are in relation to medical/hospitalisation expenses and also baggage loss. “For claims, it takes a minimum of 15 working days on receipt of all documents as per the insurance company’s requirement. Claims can be lodged by calling on the toll free number mentioned on the policy copy/policy jacket/policy wordings. The claims team provides a number which needs to be mentioned at the time of submitting the claims documents,” Madhan said.
In case of baggage loss, the claim needs to be lodged by calling on the phone numbers mentioned. On returning to India, the duly filled claim form (provided at the time of issuance) along with PIR (Property Irregularity Report), airline compensation details (if any) via a mandatory copy and the passport copy (with entry-exit stamp) needs to be submitted in original to the claims office. For medical/hospitalisation claims, in case of an OPD expense, the payment needs to be made by the consumer post which a claim can be raised on confirmation of no pre exiting disease. An ‘in patient’ claim can be settled by cashless mode on confirmation of no pre exiting disease. The attending doctors’ report, all paid bills, duly filled claim form, policy copy and passport copy are mandatory documents required.
Thomas Cook India assists the traveller to lodge their insurance claim with the concerned insurer and also help them with the specifics of documents required post logging of the claim. “We also guide the consumer on the procedure to be followed to expedite the settlement,” said Madhan. Cox& Kings has also come across various types of claims from the passenger. “Claims range from cashless hospitalisation, reimbursement of medical costs, delay/loss of baggage, trip cancellation and in case of death the body is repatriated to India. “Settlement of claims is relatively easy provided the traveller gives all the supporting documents to justify the claim. We have a Claim Settlement Team which steps in at the time of any claim. They assist the guests till the time the claim is settled/denied,” Menon said.
The way forward
“We have already e-enabled the travel insurance policy issuance for all our agents/ including other partners such as travel agents and currently in the process of M-enabling the policy issuance process through Mobile Apps. This work is in progress and should be implemented by late 2013,” Gopalarathnam said.
According to Singh, Bajaj Allianz has tied up with most of the leading travel agents and also integrated their software so they can issue policies from their location itself. “They do not even have to renter the travel details as the system can pick them up from their ticketing details. We also have special campaigns for them to boost sales,” Singh said. Madwan, however, feels that there is a need for sustained awareness on the advantages and significance of travel insurance across distribution channels and media. “Given the diversity of India’s increasingly discerning traveller, it would be of value to have insurance companies introduce innovative and impactful products at the right price points. We need to make the product simple and easy to understand- highlighting the key USP’s of each specific product at all distribution points. Ease in purchase would be a further benefit,” he stated.
Menon opines that tour operators and service providers should educate the customer on the benefit of availing of travel insurance alternately; the cost of the insurance cover should be bundled in the package cost so that the guests compulsorily avail of travel insurance. “A bundled travel product that incorporates the insurance component as a single (all-inclusive) package typically works to an agent’s advantage, and our teams at Thomas Cook India have found this effective not just in our group travel segment, but also our personalized holidays,” Madhan said.
According to Karvat, most travel agencies are unable to optimize their travel insurance sales due of lack of awareness and knowledge. “TrawellTag is launching a Travel Agent’s Engagement Programme (TAEP) in about 20 cities, starting next month, with an objective to educate and enhance their team’s skill on cross selling/upselling of allied products, travel Insurance being one of them. This programme has helped lots of travel agents globally, we are confident that it will be big success in India as well,” said Karvat.
Travel insurance is gradually becoming popular is evident from the fact that ICICI Lombard General Insurance Company and Abhibus.com recently came together to offer insurance cover to bus travellers for a premium payment of Rs 20. “With this unique product, bus commuters can now avail host of insurance benefits related to bus journey which includes reimbursement of hospitalisation expenses, personal accident cover and daily allowance,” Sanjay Datta, Chief – Underwriting and Claims, ICICI Lombard General Insurance, said, in a release. While the contribution of travel insurance to GWP of Bajaj Allianz General Insurance is just about 2 per cent, Cholamandalam MS General Insurance did about Rs.5 crores premium in FY 13. “Going forward, this is likely to scale up in a big way,” Gopalarathnam said.
