How travel insurance may fly in 2021 thanks to AI and analytics
As restrictions on international travel are lifted for UK holidaymakers, demand for travel insurance products is clearly set to rise. With ‘freedom day’ now on the horizon it is good news for travel insurers, whose business has been suspended for the last 18 months. However, they will be re-entering a very different landscape to the one they left over a year ago. How they choose to address new concerns with appropriate products and technology-driven strategies will define the success of a re-emerging travel market.
Travel insurers will have to be particularly sensitive to the impact that inconsistent travel restrictions and frequently changing regulations have had on people’s confidence in the follow-through of their bookings. Travel cancellation policies will naturally be top of mind for those planning a foreign holiday and there are insurers, such as Ulysse and Koala, that have proactively addressed obvious concerns with features such as ‘travel cancellation without reason’ options.
In fact some new research, conducted by Censuswide and published last month, suggests a strong appetite for such policies. More than a third of UK customers revealed that COVID has made them interested in taking out a travel cancellation policy, which represents a significant opportunity for insurers.
As conditions of travel are still subject to change, insurers need to be as agile as possible and strengthen their ability to calculate risk quickly using accurate, timely data. Furthermore, in the hangover of the pandemic, it is likely that cancellation policies will become part and parcel of the process of holiday-booking in the longer-term.
Investment in artificial intelligence (AI) and risk analysis tools will be a solid investment for travel insurers navigating a post-pandemic travel market. As circumstances change and new data becomes available, AI risk-modelling will allow insurers to assess risk in real-time and adjust their policy offerings accordingly.
In the shorter-term, insurers are already providing COVID-specific policies to address the current climate. The demise of airlines FlyBe, Air Italy, and Atlas Global in 2020 has forged greater demand for scheduled airline failure insurance (SAFI). Policies offered by the likes of LV are protecting customers from flight cancellations when the airline they have booked with goes bust before the original travel date.
Having introduced policies quickly at the beginning of the pandemic, other areas of white space are now showing up. Some insurers are offering cancellation policies for cases where the traveller has come into contact with someone infected with COVID, whereas previously policies stated that insurance would only be valid if a named policyholder caught the virus
themselves. More accessible and frequent communications with customers will help insurers achieve transparency over policy terms.
Some insurers are partnering with healthcare solutions for travellers like AirDoctor or taking out instant medical expenses cover from insurtechs like Battleface or Staysure. As holidaymakers become used to planning ad-hoc trips, one thing that the most appealing and successful solutions will have in common is ease of use and immediacy of service.
Similarly, insurers need to pay close attention to how customers find and book their policies as well as how they want them to be delivered. For some travel cancellation insurance there is an option to add it onto financial services via a credit provider or bank under section 75 of the Consumer Credit Act. If this is the preferred method, insurers will need to consider how they will partner with brands as a white-label insurance provider like Danish insurer Tryg, for business travel insurance.
Of course, most people will choose to have a dedicated travel policy for their trip, especially as this is more likely to give them the comprehensive cover that is in demand post-pandemic. If that is the case, demand for personalised travel insurance is a possibility. Something like this would have to take into account the individual variables that affect risk. For this, the ability to collect, analyse, and apply customer data will be crucial. Factors like frequency of travel, regular destinations of travel, and perhaps health history may all have an impact on a customer’s policy, so AI capabilities that can analyse all of this data will be needed to produce a reliable risk profile.
Very clearly, insurers will play a vital role in empowering travel companies to operate as normal again. Now that customers are more open to the reality that travel insurance is an expected and a necessary element of travel, insurers should be prepared to meet them in the market with solutions that give them confidence to go explore.
This article was published originally in Finextra.