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제목 Korea’s Travel Insurance Market Expected to Recover

Korea’s Travel Insurance Market Expected to Recover

The COVID-19 pandemic has dealt a strong blow to the tourism industry and travel insurance market. As lockdowns and quarantine measures were imposed across the world, domestic and international travel plummeted in 2020 after the onset of the pandemic. Reduced travel inevitably led to a contraction in the travel insurance market.

In Korea, the number of outbound travelers increased by 12% on average annually between 2014 and 2019 but declined sharply in 2020 (-85%) and 2021 (-71%) due to the pandemic, according to a latest report by the Korea Insurance Research Institute. The number of domestic travelers also tumbled in 2020 as social distancing measures were implemented to prevent the spread of COVID-19. In 2021, however, demand for domestic travel started to recover, and the number of domestic travelers rebounded to the pre-pandemic level.        

With the reduction in travel came a drastic fall in travel insurance premiums and the number of new policies. Total travel insurance premiums plunged by 67.9% year on year to KRW 64.98 billion in 2020 according to AXCO Global Statistics. However, a rebound is now underway, with the recovery of the travel industry gathering steam. In particular, the rebound has been driven by domestic travel growth. As for domestic travel, the number of new travel insurance policies issued by six major non-life insurers in Korea soared to 170,091 in 2021, up 49.3% from 2020, while premium volume increased to KRW 4.91 billion in 2021 from 3.82 billion in 2020.

*Based on data from six major non-life insurers, whose collective market share was 90.2% in 2019)

(Source: Korea Insurance Research Institute, May 16, 2022)


*Based on data from six major non-life insurers, whose collective market share was 90.2% in 2019)

(Source: Korea Insurance Research Institute, May 16, 2022)

 

The number of new travel insurance policies for both international and domestic travel dropped by 84.8% year on year to 51,000 in the first quarter of 2021, but there has been a gradual recovery since the second quarter of 2021 when the number of new policies increased to 67,000, which was more than twice as high as a year earlier.

The pace of recovery is expected to accelerate as many of social distancing restrictions have been lifted since mid-April 2022. Still, there are some downside factors, such as the Russia-Ukraine conflict, soaring oil prices, and rising inflation. Among others, global economic uncertainties triggered by the war in Ukraine may prevent the recovery of the tourism industry from being as fast as hoped for.    

The basic travel policy in Korea covers accidental death and dismemberment. Riders can be added to cover other risks including personal liability, medical expenses, lost or delayed baggage, emergency evacuation and repatriation. The coverage limit for accidental death and dismemberment is up to KRW 300 million, while medical expense and medical evacuation limits are up to KRW 100 million.

Travel can be disrupted in a number of unexpected ways as people have learned the hard way throughout the COVID-19 pandemic. In the future, travelers will expect more protection from their travel insurance, and some may be willing to accept higher premiums in return for greater coverage. There will also likely be an increase in demand for more flexible coverage such as a cancel for any reason option and annual travel plans.

 
 
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