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Travel insurance may not cover cancellations over coronavirus outbreak: Experts

Travel insurance may not cover cancellations over coronavirus outbreak: Experts

FILE PHOTO: A passenger in a protective mask uses her phone at Rome's Fiumicino Airport, on January 31, 2020. (Photo: Reuters/Yara Nardi)

LONDON: Companies and tourists out of pocket from the global disruption caused by the virus epidemic in China risk meeting a cold shoulder from insurers, industry experts warn.

Basic travel insurance policies are unlikely to cover epidemics. Instead, individuals are being advised initially to consult their credit card or travel providers to get refunded for cancelled bookings, and for medical costs.

Leading British insurer Aviva said customers need to have specific coverage for "travel disruption" as part of their policy to be sure of reimbursement for changes to their plans.

READ: China coronavirus death toll soars past 400

READ: Hong Kong reports first coronavirus death

"We're monitoring the situation closely, but so far the overwhelming majority of claims relate to customers who are travelling to and from China," an Aviva spokeswoman said.

Allianz of Germany said the first port of call for individuals suffering disruption should be their airline or travel agency, rather than their insurer.

The company said the outbreak was "clearly a very urgent alert" but at this stage, normal terms and conditions of insurance contracts applied.

CORONAVIRUS A "KNOWN EVENT"

The General Insurance Association of Singapore (GIA) said that most insurers "consider the 2019-nCoV a known event", and have issued consumer advisories on travel insurance claims related to or arising from the event.

Customers should approach their insurers if they are in doubt about whether a claim is covered in their respective policies - this includes travel cancellation, flight postponement and trip curtailment arising from the coronavirus situation.

They should also keep themselves updated on insurers' latest consumer advisories, GIA said.

The eligibility of claims can be affected by a cut-off date for coverage, affected regions visited and reasons for travel disruption, it added. 

READ: 2 more cities in Zhejiang under lockdown

For companies such as airlines that are now ripping up their China plans, there may be no recourse from their insurers, according to Clarissa Franks, risk management placement leader at insurance broker Marsh in London.

Communicable diseases will typically only be covered if airlines have taken out specialist coverage. But that would come at a cost that probably outweighs the risk-benefit return, Franks said.

RIPPLE EFFECTS

It is too early to determine overall costs to the insurance industry from the deadly coronavirus, experts said.

The reinsurance market at Lloyd's of London has not seen any untoward activity from traditional insurers looking to hedge their exposure to risks arising from this outbreak, two sources in the underwriting trade said.

But even if they are not covered for communicable diseases specifically, companies will be checking the fine print as ripple effects flow through their China operations and global supply chains, following Beijing's decision to quarantine entire cities.

As with SARS and other pandemics of recent years such as swine flu, Zika and Middle East Respiratory Syndrome (MERS), the industry will be "paying very close attention to this", Association of British Insurers spokesman Malcolm Tarling said.

He cautioned individuals and companies: "If someone travels (to China) against government advice, then most policies will be invalidated. If you believe your trip is essential, you need to talk to your insurer first."

READ: Air transit hub UAE to suspend China flights, excluding Beijing

READ: Major US airlines cancel China flights as government steps up warnings

RISK CALCULUS

The closest analogy is SARS, which first broke out in China in 2002 and led to a slew of disputes between companies and their insurance providers.

For the travel industry alone, the impact of SARS was estimated by the World Travel and Tourism Council at US$30 billion to US$50 billion.

But China's economy accounted for 5 per cent of the global gross domestic product then, compared to nearly a fifth today, according to World Bank data.

More Chinese now travel abroad than any other nationality, and they spend the most on average while away.

The number of infections from the new virus stands at more than 20,000, and the World Health Organization has declared a public health emergency.

But health experts stress its mortality rate among patients is lower than for SARS.

In a blog, Risk Management Solutions noted that several sporting and cultural events have already been cancelled in China, "and all risk stakeholders will be anxious over the number of months before 2019-nCoV (the novel coronavirus) is contained".

BOOKMARK THIS: Our comprehensive coverage on the Wuhan coronavirus and its developments

Download our app or subscribe to our Telegram channel for the latest updates on the Wuhan virus outbreak: https://cna.asia/telegram 

Source: CNA/afp/ga/ic

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