IRDAI’s Standardised Travel Insurance Plan May Help Increase Adoption

Travel plans with standard features and wordings will boost penetration, insurers say.

Travelers wearing protective masks are seen inside Tom Bradley International Terminal at the Los Angeles International Airport. Photographer: Bing Guan/Bloomberg
Travelers wearing protective masks are seen inside Tom Bradley International Terminal at the Los Angeles International Airport. Photographer: Bing Guan/Bloomberg

The insurance regulator has proposed a standard travel insurance policy with common coverage and policy wording across the industry to increase its adoption.

Such products will have the same features, benefits, inclusions, and exclusions, according to draft guidelines issued by the Insurance Regulatory and Development Authority of India, although prices, service levels and claim settlement rates may differ.

At present, companies including Bharti AXA, Tata AIG, Bajaj Allianz, SBI General, Universal Sompo, among others, offer travel insurance policies—which cover the financial losses travellers may suffer before or during a trip. The sum insured ranging between $50,000 and $500,000. The ongoing pandemic has provided further impetus to such plans.

Travel insurance is one of the least penetrated insurance segments in India and considering the pandemic, the IRDAI is making sure that those who travel don’t face any difficulty, according to Amit Chhabra, head of health and travel insurance at the insurance aggregator told BloombergQuint. “While a vaccine for Covid-19 is still in the works, launching a standard travel insurance policy will help bring about uniformity and certainty around coverage in travel insurance for all,” he said. “By introducing standard products IRDAI is gaining customers’ faith in the insurance ecosystem.”

What’s Covered

The draft lists out several inclusions and exclusions under domestic and overseas travel insurance.

There are as many as 15 inclusions under domestic travel insurance and 23 inclusions under international travel. Some of them are:

  • Hospitalisation expenses.
  • Accidental death.
  • Permanent disability.
  • Missed flight.
  • Loss of checked-in baggage.
  • Trip delay/cancellation.

People who had purchased travel insurance before restrictions were introduced will continue to be covered for emergency medical expenses for domestic and international travel, including for Covid-19, the guidelines said.

Insurers will also cover any trip delays or cancellation claims due to pandemic, provided the policy was purchased before the travel ban was in place. This coverage is available only on existing travel policies and not on the purchase of new policies.

What’s Not Covered

Any travel which is for obtaining medical treatment won’t be covered under the policy, according to the regulator.

Some of the exclusions are:

  • Pre-existing illness or disease.
  • Self-inflicted injury or attempted suicide.
  • Influence of drugs or alcohol or intoxicants.
  • HIV or related illness.

Sanjay Datta, chief of underwriting, reinsurance, claims and actuarial at ICICI Lombard General Insurance Co., expects penetration of the product to go up once domestic and international travel resumes following the withdrawal of the Covid-19 restrictions. “A number of different retail and group travel products are being offered by various insurers in the market,” he told BloombergQuint. “Even with the presence of numerous products, the importance of travel insurance isn’t understood by people at large.”

Kshitish Kumar Mohanty, head of corporate planning and product development at Universal Sompo General Insurance, agreed. “A standard cover with standard features and wordings obviates the scope for confusion and disputes,” he said. “The customer would always be better off for that. A reassured customer is more likely to buy.”

What It May Cost

Travel insurance is available at cheaper rates at present and standardisation may not lead to an uptick in the cost of these products, according to Joydeep Roy, partner and leader, insurance and allied businesses, PWC India. “It’s a very profitable line and I don’t see an uptick in cost,” he said. “Pricing is very affordable and profitable so don't see a change on this front required.”

In general, a travel insurance plan will cost 4-10% of the total prepaid, non-refundable trip cost, according to the insurance broker Coverfox.

For an individual in the age bracket of 3-40 years looking to travel for around 15 days for an insured sum of Rs 1 lakh within India, premiums of travel plans may range between Rs 150 and Rs 1,000, depending on the coverage, according to data from the websites of various companies that offer domestic travel insurance. For international travel, premiums range between Rs 550 and Rs 1,200 for an insured sum of $1 lakh under the same conditions, according to Policybazaar.

Datta of ICICI Lombard expects this move to add an additional revenue stream for insurers. “Retail domestic travel insurance isn’t offered by a number of insurers,” he said. “Since the regulator has proposed a retail domestic product, this will form an additional revenue stream for many companies and provide standard coverage to a segment which is very little penetrated.”

“Travel insurance has largely meant overseas travel so far,” Mohanty of Universal Sompo General Insurance said. “What the standardised product does is it brings domestic travel to the fore.”

Roy of PWC India, however, isn't sure that just a standard travel plan will not increase penetration. It’s a category that’s taken along with a planned trip and isn’t a consultatively sold product, he said. People won’t buy a travel plan just because its wordings are simplified, they have to feel the need at the time of travel, international or domestic, he said.

“Awareness has to be increased in terms of all the risks of travel—health, passport loss, baggage loss etc., for it to become a powerful proposition for customers.”