As COVID-19 Prolongs, Travel Insurance Collapses... "Need to Find Breakthrough with New Products"

On the 14th, the travel agency counters at Terminal 2 departure hall of Incheon International Airport are deserted due to the impact of the novel coronavirus (COVID-19). Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Oh Hyung-gil] As travel demand declined due to COVID-19, the travel insurance market has also significantly contracted. There are calls to promote the launch of new insurance products that cover travel cancellations and interruptions caused by COVID-19.

According to the report "Prolonged COVID-19 and the Travel Insurance Market" released by the Korea Insurance Research Institute on the 1st, the number of domestic travelers going abroad in 2020 was 4.28 million, a decrease of 85% compared to the previous year.

This is a sharp decline compared to the high average annual growth rate of 12% in domestic outbound travelers from 2014 to 2019.

The number of domestic travelers within Korea also increased by about 2% annually from 2014 to 2019, but last year it dropped by 30% to 29.36 million compared to the previous year.

The travel insurance market shrank significantly after the spread of COVID-19 but showed signs of recovery centered on domestic travel insurance as domestic travel increased instead of overseas travel.

The number of new domestic travel insurance contracts decreased by 70.4% in the second quarter of last year compared to the same period the previous year, but the report explained that it showed signs of recovery with decreases of 56% and 43% in the third and fourth quarters, respectively.

The overseas travel insurance market also contracted significantly due to the spread of COVID-19, but new products responding to emerging coverage demands have appeared.

Thailand’s health authorities and the insurance industry developed a "COVID-19 Travel Insurance" product at the request of the tourism industry, which compensates up to 3.2 million baht (approximately 120 million KRW) for hospital treatment if foreign tourists contract COVID-19 while traveling in Thailand, and pays 3.2 million baht for funeral expenses and repatriation costs in case of death.

Etihad Airways, an airline from the United Arab Emirates, also launched an insurance product in partnership with AXA that covers COVID-19 diagnosis medical expenses (up to about 200 million KRW) and quarantine costs (about 140,000 KRW) for Etihad passengers traveling abroad.

Jung Sung-hee, a research fellow at the Korea Insurance Research Institute, said, "Since the domestic travel industry is facing a serious crisis, it is a crucial time for the government to provide various supports to revitalize the travel industry, such as guaranteeing safe travel through agreements between countries with excellent quarantine measures." He suggested, "It is necessary to promote the launch of new COVID-19-related products through public-private partnerships and cooperation between the travel and insurance industries by referring to overseas cases."