"Increase in Travel Cancellations Due to COVID-19... Need for Risk Coverage with Travel Insurance"

On the 26th, marking the start of the peak vacation season, Terminal 1 of Incheon International Airport is bustling with travelers heading overseas.
Yeongjongdo - Photo by Kim Hyunmin kimhyun81@

[Asia Economy Reporter Oh Hyung-gil] Due to the spread of the novel coronavirus infection (COVID-19), disputes over refunds and cancellation fees for travel expenses have increased, leading to calls for expanding travel insurance coverage.

According to the "Impact and Challenges of the Travel Insurance Market Due to COVID-19" report released by the Korea Insurance Research Institute on the 10th, the domestic travel insurance market has significantly contracted as the number of domestic travelers sharply declined due to COVID-19.

The number of new contracts in the domestic travel insurance market in the first quarter of this year decreased by 43% compared to the same period last year, with a particularly steep drop of 63% during February and March, when the impact of COVID-19 was most concentrated. Especially, the number of outbound travelers from Korea in the first quarter fell by more than half (53%) compared to the same period last year, causing the overseas travel insurance market to shrink by 41% year-on-year (59% decrease in February and March).

The number of outbound travelers from Korea recorded a double-digit decline for the first time since October 2009, when it decreased by 23.4%.

Disputes over refunds and cancellation fees (cancellation charges) for travel expenses due to cancellations of overseas travel or domestic accommodations and events have also increased amid the COVID-19 situation.

According to the Korea Consumer Agency, the number of consumer consultations related to cancellation fees from January 20 to March 10 was 15,682, an 8.1-fold increase compared to 1,926 cases during the same period last year, with overseas travel (7,066 cases) accounting for about half (45%).

Jung Sung-hee, a research fellow at the Korea Insurance Research Institute, stated, "In situations where travel destinations become restricted areas or entry is prohibited due to COVID-19, consumers have no choice but to cancel their trips. Even when consumers request contract termination from travel agencies, cases where they do not receive refunds or cancellation fees for travel expenses are increasing. Most consumers believe that since COVID-19 is an unavoidable incident similar to a natural disaster, they should receive a full refund without cancellation fees."

As the world experiences a massive wave of travel cancellations due to COVID-19, demand for consumer protection against travel cancellation risks is increasing. However, most current travel insurance policies exclude coverage for infectious diseases.

Research fellow Jung said, "Most travel insurance products sold worldwide exclude infectious diseases as a coverage exception, and some infectious disease coverage products that were previously sold have been discontinued by insurers to minimize losses caused by COVID-19. Insurance companies worldwide have focused on excluding infectious diseases from coverage in non-life insurance products after experiences such as the SARS outbreak."

Domestic travel insurance policies that cover costs for trip cancellations also exclude cancellations due to infectious diseases, so travelers cannot receive coverage for cancellations caused by COVID-19. Even in domestic airline ticket cancellation insurance, only partial costs are covered for cancellations due to reasons such as hospitalization or outpatient treatment from injury or illness of the insured or travel companion, unemployment, or court summons.

He added, "Most consumers believe that COVID-19 is an unavoidable incident like a natural disaster and thus should be fully refunded without cancellation fees. The COVID-19 pandemic has led to a growing recognition of infectious disease outbreaks as one of the everyday risks, increasing demand for insurance coverage through policy subscriptions."

This content was produced with the assistance of AI translation services.