04 Aug 2020
Posted in Insurance
Australia’s travel insurance to contract by 7.7% in 2020, forecasts GlobalData
The Australian travel insurance business is expected to contract by 7.7% in 2020 due to COVID-19 pandemic, a sharp decline from the 46.3% growth witnessed in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised Australia’s travel insurance forecast in the aftermath of the COVID-19 outbreak. As per the latest data, travel insurance is forecasted to grow at a compound annual growth rate (CAGR) of just 0.2% during 2019-2024 mainly due to the restriction on international travel.
International travel is currently restricted till 17 September 2020. Australian carrier Qantas has already announced halt in all international flights, barring few to New Zealand, until March 2021. The airline expects domestic flights to be restored to pre-COVID-19 levels by 2022 while international demand is expected to regain only half of its pre-COVID-19 levels.
Deblina Mitra, Insurance Analyst at GlobalData, comments: “Despite the initial success in containing COVID-19 outbreak, Australia is now experiencing second wave. As a result, re-imposition of travel restrictions is expected, which will impact travel insurance industry.”
Insurers are also bracing up for refunds on planned trips and flights, despite clause in these policies on the exclusion of both epidemic and pandemic. Leading insurers such as Insurance Australia and Allianz are providing full refund for policies falling in the lockdown period. This is expected to put further pressure on the industry profitability, which is already facing challenging environment.
Domestic tourism offers limited opportunities as several Australian states and territories are set to open gradually for domestic tourism from the third quarter of 2020.
Mitra concludes: “The recovery of travel insurance is likely to be challenging and will depend on the success of containing the pandemic in Australia and rest of the world. Even after the possible economic recovery expected from 2021, the growth of travel insurance is likely to be a subdued one.”