Travel insurers suffer from rupee fall

Travel insurance

The depreciation of the Indian rupee has caused concern for travel insurers in the country, as the resultant increase in loss ratios is putting pressure on companies to increase premiums – a risky strategy in a competitive market. Mandy Langfield considers the fallout

The value of the rupee compared to the US dollar has depreciated by around 23 per cent since May this year, and as premiums are paid in rupees, but claims are paid in dollars, travel insurance providers are feeling the heat of the currency exchange problem, with some reporting a rise in loss ratios of between 20 and 25 per cent. Rakesh Jain, chief executive officer of Reliance General Insurance, commented on the situation: “The sharp depreciation of the rupee has impacted the current business scenario and has lowered demand for overseas travel. If the Indian rupee remains weak and the current business scenario persists, insurers will have to increase the cost of travel insurance to deal with the situation.” Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, said the situation had not been anticipated by the industry, hence the loss ratio increasing drastically in the last several months, confirming: “In the long run, premiums would have to be adjusted if dollar appreciation continues.”

M Ravichandran, president of insurance at TATA AIG General Insurance, also commented on the current position of the Indian travel insurance sector, proposing a longer-term strategy: “We, as an industry, are looking to work out modalities to adjust travel insurance premium to be in line with the current exchange rate and would seek regulatory approval for the same. This would help in insulating the effect of exchange rate fluctuation on loss ratios.”