What’s next for the travel industry? - Effect of Covid-19 on Travel Insurance

The fallout of the Covid-19 last year was unprecedented. Industries around the world were affected. Companies had to shut down and an unaccounted number of people around the globe was pushed into unemployment. Understandably, the travel industry was one of the hardest hit. People stopped travelling as lockdowns became the norm. Hotels and even restaurants had to shut down temporarily.

Yes, travel indeed did grind to a halt last year as the central and state governments ordered all non-essential businesses to shut down. It’ll be interesting to note here that as much as 90% of travel went down during the mid-March to mid-May period last year.

People typically get travel insurance to mitigate certain risks when they are travelling abroad. Mostly, people go for the broadest coverage products which insurance their vacation plan, cancelled trips, lost baggage and medical emergencies. Such insurances are meant for short trips, and this will surely return to normal post-Covid. Right now however, most trips are domestic only. In India, 23% of airline travelers wish to buy travel insurance for travelling during Covid-19.

Right now, borders are opening up again, which means people are more willing to travel again. Thus, more and more people are looking for travel insurance. The problem is that such insurances are mostly unable to cope with the risks of the pandemic. Insurance companies right now are unable to keep up with the wave of demand for travel insurance. For instance, policies don’t cover expenses that are related to Covid-19 and pre-existing medical conditions. These apply to government-ordered shutdowns, travel bans and Covid-19 medical costs.

This uneven distribution of insurance coverage is confusing customers when they’re looking to buy.

Some travel insurance companies like the Allianz are now discouraging people from buying travel insurance during this time while others like Seven Corners are giving special coverage just for Covid-19 related costs.

What’s next for the travel industry?

Right now, the travel insurance industry is seeing business fall in the double digits. As you have seen, travel insurance coverage is not doing well since few people are travelling. On the other hand though, since there is also a fall in claim payment, there is some semblance of balance in the industry.

Some airline companies have responded to the pandemic by giving refunds beyond the normal fee lock-in period and even changes in the effective flight date if the insured one postpones and/or reschedules a trip because of the Covid-19. Their strategy is to keep the business going somehow, not cancel their business outright.

What’s in store for the future?

All is not doom and gloom. After months of lockdowns and quarantine, people are planning their dream vacations. They have had a lot of time to plan their trips and not can’t wait to take them. To encourage this trend, airlines and cruises are giving high discounts to entice people.

Personal Finance Changes in India - Personal Finances Changes in India

The coronavirus or Covid-19 pandemic has affected the livelihood of people all over the country. Many have lost their jobs while others have to make do with 50% salaries. Some, even though are not laid off, have their salaries delayed by 2 or even 3 months. All of these have created a sense of panic and helplessness in daily-bread earners all over the country.

Earlier this year, the Government of India announced several measures to diminish the problems of the common man. These included ATM charge waiver, savings account non-maintenance charges fee waiver, and more.

However, from 1st July 2020, some of these relaxations shall be withdrawn. Here are the 5 money-related items which have come into effect from 1st July, 2020.

1) Restrictions on ATM use is back again

On March 24 this year, the government announced that for 3 months all debit card holders can make withdrawals from any ATMs without any withdrawal limit. From the 1st July, the regular charges and limits shall apply. Here are the numbers of free transactions a debit card holder can still make, according to the RBI.

Transactions at bank’s own ATM from anywhere: A debit card holder now has a minimum of 5 free financial transactions in any month. This will not depend on the location of the ATM. Furthermore, there shall be an unlimited number of non-cash withdrawals for free.

Transactions from ATMS in metro cities: If the ATMs are located in any of the 6 Metro cities namely Chennai, Bangalore, Kolkata, Hyderabad, Delhi and Mumbai, savings bank accounts customers get a minimum of 3 free transactions per month.

Transactions from other bank’s ATMS at non-metro areas: From any other location other than the 6 metro cities mentioned above, banks will give savings account holders a minimum of 5 free transactions per month at other bank’s ATMs.

Charges when exceeding transactions limit: According to RBI guidelines, these can’t charges cannot be more than Rs.20 at maximum, per transaction. Applicable taxes are extra.

2) Penalty charges for non-maintenance of bank account balance

A big relief measure provided by the Finance Minister Nirmala Sitharaman in March was the waiver of penalty on non-maintenance of one’s bank account balance. The waiver was for 3 months. This period is part now, and thus non-maintenance of bank account balance shall attract a penalty from now on. The penalty amount will differ from bank to bank.

3) Stamp duty on buying of mutual fund units and shares

From 1st July 2020, buying of mutual fund units and shares shall attract stamp duty. According to the FAQ published by the Finance Ministry, the previous system of giving stamp duties on securities caused multiple rates for the same financial instrument, which thus resulted in multiple incidences of duty and jurisdictional disputes. This in turn raised transactional costs in the security market and adversely affects capital formation. By the current amendment, the stamp duty shall be levied by one agency. Furthermore, the revised FAQ has clarified that there will be no stamp duty for redeeming mutual funds since it is neither a sale not a transaction. The duty is charged on the unit value, and does not include charges like GST, AMC fee, etc.