Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on November 1, 2021 - November 7, 2021

THINGS are beginning to look up for airlines and hospitality industry players as countries gradually reopen their borders. In anticipation of international travel resuming and subsequent increase in travel bookings, non-life insurers are also expecting more demand for travel insurance, which has become essential since the Covid-19 outbreak.

This is further bolstered by news that more countries are making it mandatory for inbound visitors to have travel insurance that covers Covid-19-related medical expenses with a minimum amount.

Some general insurers such as AIG Malaysia Insurance Bhd and Tune Protect Group Bhd have revised their white-labelled travel insurance products, which are sold under another company’s brand such as airlines, to include Covid-19-related incidents. But most are still looking into adding Covid-19 to their existing travel insurance plans as standard policies for travel insurance/takaful do not provide coverage for any communicable disease.

Chris Eng, chief strategy officer of Etiqa Insurance and Takaful, a member of Maybank Group, says it is anticipating strong growth in travel insurance given the resumption of travel.

“Awareness of potential health and other issues during travel has already increased and therefore the take-up rate of travel insurance should also increase. However, as Covid-19 is [deemed] a pandemic, this is currently excluded from many traditional travel insurance products. Etiqa is exploring extending our travel coverage to include Covid-19 cover,” he tells The Edge.

Countries like Singapore, Thailand, Vietnam, the UAE, Turkey and Portugal are reportedly requiring travellers to have mandatory travel insurance covering the necessary medical expenses related to Covid-19.

“We expect more countries to impose such requirements as borders open up. The specifics, however, are still uncertain and will determine whether or not an insurance company will be able to provide such coverage. It could be provided by special Covid-19 insurance or takaful products catered for travel, given that traditional travel insurance products do not cover Covid-19 at the moment,” says Eng.

Tune Protect lifestyle lead Normah Baharom says for Malaysians travelling abroad, the mandatory Covid-19 coverage will depend largely on the government of the destination country imposing such requirements. For example, Thailand and Singapore have mandated that travel insurance must have a coverage level of at least US$100,000 and S$30,000 respectively for all inbound travellers.

“In terms of inbound travellers to Malaysia, Prime Minister Datuk Seri Ismail Sabri Yaakob recently announced the opening of Langkawi for fully vaccinated foreign visitors commencing Nov 15. In the announcement, the government has imposed a mandatory insurance coverage of at least US$80,000 for these leisure travellers to enter the island,” she says in an email response to questions from The Edge.

Under the Malaysian Aviation Consumer Protection Code 2016, airlines in Malaysia are prohibited to automatically add on services such as insurance effective Aug 31, 2016.

Tune Protect among the biggest beneficiaries

Among the beneficiaries of the push to mandate Covid-19 insurance coverage is Tune Protect, which has seen its travel insurance segment’s gross written premium (GWP) increase 542% year on year to RM15.4 million for the second quarter ended June 30 (2QFY2021), recovering from the pandemic impact in 2QFY2020 when GWP only totalled RM2.4 million.

“The growth in Tune Protect’s travel business was encouraged by travel recovery and performance of Covid-19 products in the Middle East by Tune Protect Re, the reinsurance arm of Tune Protect, which was largely contributed by the business-to-business (B2B) segment and the Middle East’s low-cost carrier Air Arabia [of which Tune Protect is its travel insurance provider],” says Normah.

“As countries are gradually reopening their borders, we can anticipate stronger exponential growth in the travel insurance take-up rate. The Middle East was one of the regions that reopened [its borders] the earliest in 2020. And when it did, Tune Protect’s travel business in that region doubled y-o-y despite the pandemic. We observed a pent-up demand for travel, or what is being termed as ‘travel revenge’,” she adds.

Normah says looking at the successful rollout of the Langkawi travel bubble, which commenced on Sept 16, the preliminary number of domestic tourists that visited the island indicates pent-up travel demand as well as signs of travel recovery.

“With the declining rate of daily Covid-19 cases in Malaysia, the lifting of interstate travel restrictions in October and talks about reopening Malaysia’s borders in November, we are positive of a higher take-up in travel protection. Proper standard operating procedures (SOPs) and safety measures have also been put in place by governments and airlines, making people feel more comfortable and convinced to travel,” she says, noting that this is further strengthened with countries like Singapore, Thailand and some in the Middle East that have made it mandatory for travellers to have a certain amount of coverage before being permitted entry.

According to Kenanga Research analyst Clement Chua, travel insurance only makes up 5% to 7% of Tune Protect’s GWP, from 20% previously, owing to Covid-19 restrictions. While Tune Protect is AirAsia Group Bhd’s travel insurance provider, the low-cost carrier comprised less than 10% of the group’s business as at 2QFY2021, from about 90% pre-pandemic, he wrote in an Oct 14 report.

Chua has a “trading buy” call on Tune Protect, with a target price of 60 sen. Tune Protect’s share price had risen 12.5% year to date to close at 49.5 sen last Thursday, translating into a market capitalisation of RM372.12 million for the insurer.

Travel insurance to cost more due to Covid-19

The premium for most travel insurance plans depends on several factors such as the coverage amount, duration and destination. Still, prices of travel insurance with Covid-19 coverage have risen sharply. According to research from GoCompare, travel insurance premiums have risen 20% to 30% due to Covid-19.

To cater to the countries’ requirements for travellers to have mandatory travel insurance, Tune Protect has enhanced its travel policy to include Covid-19-related cover for AirAsia passengers from Malaysia and Singapore, introduced Tune iPass in Thailand, and offers Covid-19 Plus extension products in the Middle East, where travel protection is bundled in AirArabia flight tickets.

AirAsia passengers departing from Malaysia, for example, may take up the AirAsia Travel Protection by Tune Protect at premiums starting from RM47.50 per passenger.

Normah says the enhanced travel protection covers up to RM100,000 in medical expenses if policyholders contract Covid-19 and are hospitalised in any of these seven countries — Singapore, Indonesia, Thailand, Brunei, Vietnam, Cambodia and Myanmar. It also extends Covid-19 coverage of three existing benefits, namely trip cancellation, daily hospital allowance and compassionate visit.

“One of the unique features of this enhanced travel protection plan is the Covid-19 bereavement allowance, which pays out a sum of RM5,000 in the event of an untimely demise of the policyholder due to Covid-19 contracted during the trip,” she adds.

Normah also points to the group’s Thai associate — Tune Protect Thailand — which introduced Tune iPass in June 2020 in response to the Thai government’s requirement for all inbound travellers to have a travel insurance plan with Covid-19 health and medical coverage of at least US$100,000.

“We were the first insurer in Thailand to introduce this travel protection to the market and we have received overwhelming response from travellers. This has propelled us to being the market leader, with a 29% market share of travel insurance in Thailand for 2020,” she says.

Available in three plans, the premium for Tune iPass starts from THB3,100 (RM386.50).

Is this the real turning point for insurers?

Allianz General Insurance Co (Malaysia) Bhd CEO Sean Wang is expecting growth to pick up gradually across all business areas in line with increased economic activity, which will increase demand for commercial insurance coverage, while improved consumer sentiments will increase demand for personal lines of insurance.

“As Malaysia lifted its ban on interstate travel from Oct 11, we see a rise in domestic travel. With the majority of people now vaccinated, people feel more confident to move about and in turn, travel will increase as you can see from media reports and also people uploading photos of their travels on social media,” he notes.

“Nonetheless, people remain cautious as the travel restrictions have only recently been lifted and the situation is very uncertain if a travel ban will be reimposed or the number of cases will increase. Based on these developments, we foresee a gradual increase in demand for travel insurance for a start,” he says, adding that travel insurance, however, forms only a small part of the company’s diversified portfolio in the general insurance business.

The motor business segment is currently Allianz General’s largest revenue contributor. “We have seen motor insurance picking up in line with increased car sales as showrooms have reopened since August,” says Wang.

In terms of operating revenue, Allianz General’s contribution to Allianz Malaysia Bhd was 42% in FY2020.

For its 1H2021 results, Allianz General’s GWP came in at RM1.19 billion, up 4.7% from RM1.14 billion a year ago. Allianz General is ranked No 1 in the general insurance industry, having captured a 13% market share in the first half of the year, according to ISM Insurance Services Malaysia Bhd market performance.

Tune Protect group CEO Rohit Nambiar says the group is banking on three business pillars, namely health, lifestyle and small and medium enterprises (SMEs), to drive future growth. It has also identified the younger consumer demographic such as millennials and Generation Z as a segment with strong potential and is widening its distribution channels by leveraging digital and partnerships to create unique propositions targeted at this segment.

“In the lifestyle segment, one of the areas that we foresee growth is the travel business. Though our international borders have yet to reopen, there has been talk that it will by November. When the Langkawi travel bubble was rolled out in September, our travel premiums and policy count for that month doubled from the same period last year,” says Rohit.

He points out that Malaysia’s travel industry has shown signs of recovery since the lifting of the interstate travel ban and with the national adult vaccination rate passing 90%. “We are seeing the demand for travel protection increasing as people are becoming more aware of the risks of not having one.”

Rohit also says Tune Protect is accelerating its partnerships reach as the group further expands its presence across Southeast Asia with affinity and digital partners as well as insurance partners. To date, Tune Protect has secured more than 40 partnerships with companies in sectors such as airline, property, e-commerce, e-wallets, telecommunications and logistics.

Tune Protect saw its net profit decline 64% y-o-y to RM18.39 million in the financial year ended Dec 31 (FY2020), due in part to a 25% drop in net earned premiums.

In an Oct 13 report, Rakuten Trade Research analyst Queenie Tan says she expects Tune Protect to register a net profit of RM18.5 million and RM50.8 million in FY2021 and FY2022 respectively, following the relaxation of SOPs and gradual lifting of travelling restrictions worldwide.

Etiqa’s Eng says the company saw a reduction of around 80% in the value of travel insurance sold in 2020/21 compared with 2019.

For 2021, Etiqa is expecting a modest growth in the company’s GWP over 2020.

“Travel is definitely an area of growth. Also, many Malaysians had deferred the renewal of motor insurance/takaful as they did not need to renew their road tax and were not driving. With the need to renew the road tax coming up soon and with more mobility on the road, we see a rebound in motor insurance/takaful demand,” says Eng.

 

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