Could domestic travel insurance become more popular? Photo / Getty
Could domestic travel insurance become more popular? Photo / Getty
New Zealand's largest travel insurer is eyeing the potential to expand into travel domestic insurance as the country edges closer towards alert level 2.
But Southern Cross Travel Insurance chief executive Chris White says its profit is likely to be close to zero this year as global travel remains onthe back-burner amid the Covid-19 outbreak.
The pandemic has been described as a black swan event - an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.
White said for travel insurers it was a three-headed black swan.
"We've had a massive claim event followed by a total shutdown in travel."
The insurer was now cancelling policies for future dated events and refunding premiums which meant not only had it stopped taking in revenue it was also losing future revenue.
As part of the Southern Cross group, its profits normally go into the Southern Cross Health Trust but now it will use capital reserves built up over the businesses lifetime to keep it running.
White said the big challenge at the moment was to make good, informed decisions for the business that were not rushed and would allow it to scale up again when the time was right.
"We acted early and took out variable staff costs," he said.
"We made a commitment to preserve our permanent staff for as long as we can," he said.
The company managed to pay full wages for the first four weeks of lockdown but all staff have since taken a 20 per cent pay cut. The company has claimed the wage subsidy for 92 staff totalling $646,723.20.
But White said it would have to "right-size" the business by the end of the 12-week payment period and was working through that process now as its scaled back while waiting for the return of global travel.
However, the company was sticking around for the long run.
White said it was hopeful transtasman travel would return this year but didn't expect it until after winter ended.
"Winter causes issues - are you coughing because you have a cold or Covid-19?"
He expected business travel to resume before leisure travel and said he would like to think travel to the Pacific Islands would come either at the same time or shortly after transtasman travel resumed.
Chris White, chief executive of Southern Cross Travel Insurance. Photo / Supplied
Its forecast for wider international travel to resume ranges between six months and a year.
White said even when airlines started to take bookings it would take time for people to jump on board and then book travel insurance.
Asked what impact Covid-19 would have on travel insurance prices and policies he said "I think anyone in the industry who thinks there will be no change is living under a rock".
"Pandemics are difficult to cover because of the difficulty to price them - and you have to get reinsurance. Those things are all being reviewed and looked at."
For now, the insurer is focused on refunding policies for travel which can no longer take place and will waive its $35 cancellation fee as part of that.
White also hinted at the potential for it to expand into domestic travel insurance.
"Watch this space. We see real potential to bring forward plans to expand our existing product and value propositions".
