In the face of intense volatility during the pandemic, travellers are more than ever needing assurances and safety nets before they will resume travel. Besides potential medical expenses, there are refunds for cancellations, additional costs for quarantine and/or repatriation if border regulations change, to consider.
Carl Jones, who heads travel in Asia Pacific for SAP Concur, said in a recent WiT podcast episode that he is already seeing a shift in conversations, away from costs – cheapest flights, removing transaction fees – to being about safety and duty of care. Those are, not surprisingly, now top of mind considerations for corporations and travellers.
Yet protection against these appear harder to come by as travel operators struggle for survival and insurance companies are still in the process of assessing their exposure to new risks and determining their own risk appetites before putting in place new products for travel.
“It is a really difficult situation for insurers, because you can only typically provide a product where you can assess the risk with some form of confidence. And the risk with pandemics and the downward implications are so unknown that it’s really difficult for them to put a model together for pricing in the risk. That’s why it has been taking time for the big insurers to formalise a strategy and policy on Covid. Even the policy on Covid itself is likely to have exclusions on other pandemics and we are likely to see ongoing changes to the policies themselves as the landscape evolves and the insurers obtain more data on the risk exposure,” said Brett Dyason (pictured right), co-founder and CEO of Hepstar, a South African-based startup which promotes a global travel ancillary product suite that includes travel insurance.
Positive signs ahead, but everyone has to play a part
There are positive signs, however, Dyason pointed out that insurers are enhancing their products to include Covid-related incidents, so some customers will be covered for Covid depending on the selected provider’s product benefits and offering. Some of the insurers, he said, are bringing out new products with higher price points, which specifically include Covid-related incidents, but not other pandemics. And some insurers are looking to embed it in the current product offerings. It’s really important for travellers to understand whether Covid related incidents are covered in the travel insurance product they have purchased.
AXA has partnered with Lufthansa, TUI and Accor among others to roll out travel insurance policies that cover Covid-related incidences. These are currently only being offered in Europe. AXA Partner’s senior vice president Global Travel Erick Morazin said it is in talks with a few airlines in Asia Pacific and will soon make announcements of new partnerships there.
Morazin said a popular feature of AXA’s policies is the teleconsultation that it provides travellers, connecting them with physicians who can help answer their questions anywhere they are.
When asked if AXA is looking to partner with OTAs as well, he said he hasn’t begun conversations with them but stressed the importance of the entire travel ecosystem working together to get travel to rebound.
The need for all industry sectors and governments to work together on this mammoth task of rebuilding travel cannot be overstated. For example, some governments are requiring medical coverage as a prerequisite for visa issuance, but if there are limited travel insurance products to be had, it makes those visas unattainable.
“We support World Travel & Tourism Council’s actions and statements, and we are aligned with their requests. We understand the situation and are not asking governments to open all borders overnight – we are in the risk business and we understand risk. We know governments are acting to mitigate these risks right now. But yes, we are pushing for governments to be more aligned in the way they manage this risk. We need to be all together in providing the solutions. AXA will play our role in this ecosystem,” added Morazin.
“Pandemics has always been an exclusion on most insurance policies. Insurance companies now have to start looking into what that exclusion means in this day and age and the extent to which it should still apply. For example, they are forced to expand medical benefits to include COVID-related events in order to meet visa requirements, but then there are also a vast amount of scenarios that arise from COVID and government response thereto which adds to the risk of travel, of which forced quarantine, forced changes in itinerary or being stuck abroad are but a few to consider” said Heinrich Brand, co-Founder and chief operating officer at Hepstar.
He said what insurers have been rather disinclined to cover is cancellation because of the cumulative risk associated with government response to COVID, commonly known as lockdowns, whereas insurance is typically modelled around acute events that may befall select individuals or their travel companions. Airline tickets, for instance, may be deemed unusable not because the airline is not providing the service, but because of borders closing. The question is who carries the burden of refunds?
“We can sympathise with the customers as we can with the airlines and the travel agents. It has been an unfortunate situation where everyone has suffered,” said Brand.
Brand said some of the cancellation risk can be curbed by customers taking responsibility for what they can control. “If you want to travel, make sure you quarantine for two weeks before your departure date.
“As for the airlines and other travel operators, they would need to relook their cancellation policies or look at different ways of pricing for this risk,” added Brand.
Afterthought no more
Insurance providers are seeing some bright sides to all this. While travel insurance might previously have been an afterthought pre-Covid, it certainly has taken on a much more prominent position in the travel decision making process and would likely remain that way moving forward.
“We’ve seen in some of our online travel channels the attachment rate increase by 20 or 30% on travel insurance, and so I definitely think the market will move in that direction. And for good reason. A lot of the time people have not bought travel insurance because there hasn’t been a risk impact, it’s been seen as a grudge purchase. But now, there’s been a risk impact – a large proportion of people have had to cancel or claim for medical,” said Dyason.
“I definitely think people will be far more cognizant of the benefits around travel insurance, rather than taking the age old stance, and I’ll use a very crude way of explaining this – a lot of time people view insurance kind of like toilet paper – you don’t want to have to buy it, but you kind of need it.
There’s no immediate tangible value associated to the product when you buy it, unlike when you buy a flight ticket, you know what you’re getting. When you buying insurance, you don’t get anything unless something happens. Ironically, travel results in a high concentration of financial risk over a short period of time. And that’s the problem with people’s mindsets when they view insurance. But now, I think that mindset is going to shift and people are not going to think, I’m not getting anything from it. They’re going to say, ‘I think we should get travel insurance in case something happens remember what happened with Covid.’”
“I definitely think there is going be a shift in consumer behaviour,” added Dyason.
Featured image credit: Getty Images
