Travel Insurance to Be More Costly and Limited

It is not clear how and when the sky will reopen, but it is already clear that overseas travel insurance will become a much greater expense to consider when planning a trip

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Tourists wearing face masks walk past the ancient Colosseum, in Rome, March 5, 2020
Tourists wearing face masks walk past the ancient Colosseum, in Rome, March 5, 2020Credit: Andrew Medichini/ AP

It’s not clear when Israelis will start to travel abroad again, but when they do, they could find out that travel insurance is much more expensive than it used to be.

Since the coronavirus crisis began, most of Israel’s insurance companies have stopped selling travel insurance for trips abroad. Currently, the companies are attempting to calculate the cost of coronavirus-related travel risks.

“Everything is constantly changing and the [expected] second wave of the virus is the reason that many companies are still closed and waiting it out. If there is a second wave of coronavirus infections, they’ll need to redo their actuary calculations,” said an industry source.

Some companies have already drafted new policies and submitted them to the Capital Markets, Insurance and Savings Authority for approval, while others plan to do so soon.

A passenger wears a mask while boarding a United Airlines flight at George Bush Intercontinental Airport, Houston, May 24, 2020Credit: David J. Phillip/ AP

In the meanwhile, until new rates are approved, insurance companies can raise their rates slightly until they hit a previous cap approved by the authority, and make certain changes to the policies. For instance, the insurance companies Harel and Phoenix have currently decided not to offer insurance for travel to the United States due to the high virus risk there.

Elderly citizens, for whom the coronavirus poses the highest risk, are likely to have trouble buying travel insurance in the near future.

“We’re trying to find creative solutions so that people aged 70 can leave Israel, but their risk level is extremely high and from an actuarial perspective we haven’t yet found an acceptable premium to address this,” says Alon Ketzef, president of the DavidShield group, whose subsidiaries includes travel insurance company PassportCard.

At Phoenix insurance, meanwhile, travelers aged 80 and up now need to bring a letter from a doctor.

It may be several months until new travel insurance policies are available. Direct Insurance, for example, stated that its travel insurance would be available starting September 1, while PassportCard is planning to start offering travel insurance starting August 1.

Dudi Oz, head of overseas travel insurance at Phoenix, stated that medical coverage is now more expensive given the long hospitalizations necessary for someone who falls ill with the coronavirus abroad. Insurance companies would also face the cost of a customer who isn’t permitted to board a flight home due to a fever or a coronavirus infection, he noted.

“The international trend is toward coronavirus testing at the airport,” he said. “When some 90% of cases aren’t accompanied by symptoms, many people could get to the airport and then be told they can’t board the plane,” he said.

Travelers wearing masks chat in the arrivals terminal of Ben Gurion International airport, Lod, March 10, 2020Credit: Ronen Zvulun/ Reuters

Other forms of coverage, such as those relating to personal items and non-coronavirus medical coverage, will remain unchanged, as will their rates, says Ketzef. To this a new, coronavirus-related component will be added, with differential rates depending on the travel destination and the chances of being infected there.

This new premium could range from $1.50 to as much as $150 a day at the moment, according to a calculation PassportCard ran on Tuesday. The company isn’t even selling coverage for Brazil for the near term, Ketzef added, since there’s no premium that can justify the risk.

The biggest challenge facing insurance companies is the risk from sudden government decisions, and some are not even offering coverage in such cases.

“If a country decides to put everyone into lockdown, like China did, insurance companies need to decide what coverages they’re offering and who will be stuck there,” he says.

“Travel insurance will no longer be something you buy automatically online,” he says. “It will be important to check what exactly you’re buying.”

Airlines have stated that they intend to reinstate flights in June or July. However, as long as Israelis returning from abroad are required to enter a two-week quarantine and foreigners are blocked from the country entirely, it’s questionable whether there will be much of a demand for flights.

It’s also not clear what flights will cost once they finally resume.

“At first, in early July, flights will be cheaper because demand will be low,” forecasts Ephraim Kramer, CEO and owner of Eshet Tours. “Later prices definitely could increase,” he says.

One factor making flights potentially more expensive is a decrease in competition as some airlines collapse, merge or are bought out. Social distancing and hygiene measures – such as keeping some seats empty – may also increase the airlines’ costs.

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