Travel insurance payouts rise 11.5% in first half, outpacing premium growth

Travel insurance payouts in the first half of this year totaled 21.26 billion won ($14.1 million), up 11.5 percent from a year earlier — more than double the 5 percent growth rate in premiums collected over the same period. The surge reflects both rising demand for overseas travel and a sharp increase in claims, particularly for flight delays.

Nine non-life insurers selling travel insurance — Meritz, Hanwha, Lotte, Heungkuk, Samsung, Hyundai, KB, AXA and Kakao Pay — paid out a combined 21.26 billion won in the first half, up from 19.07 billion won in the same period last year, according to industry data released Tuesday. The number of claims paid also rose 6.4 percent to 83,701 cases.

Over the same period, new contracts grew 3.2 percent to about 1.74 million and gross premiums rose 5 percent to 62.3 billion won, meaning payout growth outpaced premium growth by more than twofold.

By coverage type, overseas medical reimbursement accounted for the largest share of payouts at 8.12 billion won across 17,959 cases. While the number of claims fell 2 percent, the total amount paid rose 12.4 percent, driven by a 14.7 percent jump in the average payout per claim — from 394,000 won to 452,000 won.

The fastest-growing coverage category was flight and baggage delay compensation, where payouts surged 66.8 percent to 2.57 billion won. The number of claims rose 28.3 percent, from 18,699 to 23,999 cases, and the average payout per claim climbed from 82,000 won to 107,000 won. Industry analysts attributed much of the increase to the spread of index-type riders that pay a fixed amount based on the length of the delay.

New contract growth slowed sharply compared with the first half of last year, when gross premium growth hit 38.9 percent. Trends also diverged by destination. Domestic travel insurance new contracts edged down from 26,844 to 26,541 cases, and gross premiums fell from 995.67 million won to 940.15 million won. Overseas travel insurance, by contrast, grew from about 1.66 million to about 1.71 million new contracts, with gross premiums rising from 58.31 billion won to 61.36 billion won. Analysts pointed to a 6.3 percent increase in passenger traffic at Incheon Airport and lower international fuel surcharges, which reduced the cost of airfare.

By age group, all cohorts aged 30 and above posted increases. Those in their 30s led the growth, with new contracts rising 13.8 percent from 495,601 to 564,137 cases, while policyholders aged 60 and older grew 3.9 percent, those in their 50s rose 1.1 percent, and those in their 40s increased 0.8 percent. Those in their 20s fell 2.1 percent, and the under-20 group saw the steepest decline at 14.6 percent.

Financial regulators are urging consumers to carefully review how their travel insurance policy pays out before purchasing. Flight delay compensation in particular can be structured either as an index-type policy — which pays a fixed amount — or a reimbursement-type policy that covers only actual expenses incurred, and the two are easily confused. Regulators also cautioned that simple losses due to carelessness, broken eyeglasses and minor luggage damage are generally not covered.