Travel insurance rates likely to be flat this year

Stable rupee means travellers won’t need to pay higher premium

Mumbai, May 8:  

This year, outbound travellers will not feel the pinch of higher travel insurance premium as general insurance companies are unlikely to raise rates, thanks to the increasingly stabilising rupee.

The claims for outbound travel insurance are paid out by general insurers in foreign currency while the insurance companies collect premium in rupees.

Tapan Singhel, MD and CEO of Bajaj Allianz General Insurance, said since the rupee has stabilised during the last three months at 60-61 to a dollar , general insurance companies would be able to maintain current premium rates.

According to KK Mishra, insurers have been seeing a higher loss ratio in the travel insurance portfolio as most of them had priced their policies when the rupee was around 55 to a dollar.

“So, if the rupee weakens beyond 60-61, insurers will be forced to raise rates or link it to the exchange rate fluctuation in the currency,” Mishra explained.

Small portfolio

The travel insurance segment is currently a very small portfolio for general insurers â€" at 0.1 per cent (or about ₹540 crore) of the total premium collected by the industry.

While it is a growing portfolio, insurers feel most travellers opt for travel insurance only while travelling to the Schengen area comprising 26 European nations, where having a cover is mandatory, and while travelling to the US and Canada where medical expenses are very high.

According to Singhel, when travelling to South-East Asian countries and West Asia, most tourists feel that they do not need travel insurance.

For instance, a 30-year-old traveller on a 10-day excursion to Europe would pay a premium of about ₹900 for a $100,000 cover for emergency medical expenses, accidental death, loss of baggage, etc. The same person would pay 30-40 per cent more for a trip to the US and Canada.

(This article was published on May 8, 2014)