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Falling rupee may raise travel insurance premiums

Voyageurs may now have to pay more for their outbound travel expenses as travel insurance prices are feared to rise due to the failing rupee. Outbound travel insurance claims are paid for by general insurance companies in the form of foreign currencies while the insurance companies receive premiums in rupees.

The record fall in the price of the Indian rupee is hitting the travel portfolio of many travel insurance companies, according to experts in the industry.

The decline in the Indian rupee has witnessed a depreciation of 22% against the US dollar and is becoming a huge concern for the travel insurance industry. Analysts estimate that 2012 could be a tough year still for the rupee, which could continue to trade in the wide range of 50-54. Some experts are predicting that the rupee may reach 58 to the US dollar.

The principle claims that insurance companies receive in the travel insurance portfolio go towards emergency medical expenses. Mr Vikramjeet Singh from the Bajaj Allianz General Insurance said that the travel insurance market is currently very competitive in India. He added that a person could get covered for $50,000 for the low price of Rs 400 (except for the US).

Mr Neelesh Garg, who is Executive Director at the ICICI Lombard GIC Ltd., said that the company had priced its premiums when the rupee was at levels of 44-45, adding that this sharp depreciation would force the firm to contemplate how long it could continue with the current premium levels.

Mr Karan Chopra at HDFC ERGO called the impact on the travel insurance portfolio proportionate to the fall in the rupee. He added that an upward revision of the premiums rate will be on the radar only if the current depreciation of the rupee continues. This puts non-life insurers face-to-face with an impact of almost 15 – 20 per cent due to the depreciation of the rupee.

The travel insurance industry makes up an estimated Rs 300 in the Indian general insurance industry. The figures are struck with health insurance figures, which makes up a much larger market, in the available data.

Tour operators and travel insurance companies have said that Indian outbound travel witnessed a double-digit growth in the past few years. The sheer number of Indians going overseas went over the 12-million bar in May 2011 and will likely touch 50 million before 2020, according to the latest industry survey.

 

 

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