Thumbs up for travel insurance

WEALTH PROTECTION

Kuala Lumpur: Insurers have welcomed the plan to make travel insurance compulsory for outbound travellers to help spread the risk and thus ensure a better chance of making profit.

Currently, travel insurance schemes are optional for those travelling out of the country.

Malaysian Takaful Association (MTA) chairman Datuk Syed Moheeb Syed Kamarulzaman said generally travel insurance is shunned by insurance companies because of high losses.

He explained that insurers would suffer from high claims for loss of baggage, loss of personal effects and delays or curtailment of journeys.

Although air travel has taken off at a fast rate in recent years, thanks to low-cost flights offered by budget airliners, travel insurance is still a small and an unattractive portfolio for insurers.

Furthermore, travel insurance can be expensive for insurers since those who had experienced earlier losses are more likely to buy travel cover and claim.

Although it has been reported that The Malaysian Association of Tour & Travel Agents (Matta) is in talks with more than 10 insurance companies to develop a compulsory travel insurance plan, the scope of cover is yet to be known.

Generally, travel insurance cover is taken by those who travel abroad to cover certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.

However, worldwide claims on travel insurance policies have risen manifold in the last few years as a record number of people seek emergency medical treatment while abroad.

Last year, British insurers paid out STG275 million (RM1.32 billion) in emergency medical treatments for UK travellers who fell ill abroad, equivalent to STG5.3 million (RM25 million) a week, according to the Association of British Insurers (ABI).

The cost of medical expenses claims has surged by over 270 per cent in the last six years, figures from ABI revealed.

The statistics would send shivers down the spine of local insurers who are already pressed to maintain a high level of capital due to new industry rules.

However, for Syed Moheeb, compulsory travel cover "is a plus for the industry as there will be better spread and as such better chance for underwriting profit".

Swiss Re, a reinsurance giant, underlined travel insurance as one of the few growth opportunities for insurance players here once made compulsory.

At present, travel insurance cost depends on the scope of cover, zones visited and duration of trip. It can be as low as RM50 for travel for a few days within Asean, and up to thousands of ringgit if one is travelling to the US, South America and South Africa up to a month.

According to Chartis Malaysia chief executive officer Matt Harris, the average cost for travel insurance is RM90 per trip.

He said Matta's announcement is positive for the insurance industry and travellers as it will ensure peace of mind for travellers and allow them to focus on enjoying their overseas trip.

"Chartis encourages travellers to take out travel insurance as it will helps address many scenarios where people find themselves exposed to significant costs when accidents and delays occur during overseas travel," Harris said.

Meanwhile, Federation of Malaysian Consumer Associations (Fomca) was also supportive of the plan so long as the premiums remain competitive and are not a burden to consumers.

Its chief executive officer Datuk Paul Selvaraj said the regulator should ensure that insurers do not take advantage of the compulsory cover for profits only.

By Rupinder Singh