Travel insurace – got it covered?

Travel insurance is not exactly one of the most glamorous areas of the industry. But, as Tricia Holly Davis discovers, providers are aiming to keep the online buying process as clear and simple as possible There is no denying that travel insurance is as crucial a part of a trip as the flight or hotel,…

There is no denying that travel insurance is as crucial a part of a trip as the flight or hotel, since it can make the difference between salvaging a holiday gone wrong and even life and death. But it is also the least fun part of planning a trip.

Poring over the fine print of cancellation policies does not deliver quite the same level of satisfaction as the scramble to unearth the lowest air fare to Australia, compare restaurants in Miami Beach or find the best spa package to Thailand. This helps explain why online travel agencies do not spend a lot of time promoting travel insurance and try to make the purchase process as simple as possible.

“Travel insurance is a necessary evil,” says Chris Roe, who oversees Opodo’s insurance sales. “As travel sellers, insurance is something we need to offer but it is not something customers want to spend a lot of time on.”

This is why the UK’s biggest sellers of travel online do not scour the web searching for the best-priced travel insurance policies in the same way they search for the best rates for air, car and hotel. Instead they have exclusive partnerships with individual insurance firms.

“Customers do not want the same level of information about insurance as they do about other parts of their trip. It’s ‘do you want insurance, yes or no’?” says Roe.

Steve Hook, director, corporate and travel division for Mondial Assistance, which underwrites policies sold by Expedia, Travelocity.co.uk, and other online brands and low-cost carriers, notes that a percentage of those who do not buy insurance online when booking a holiday or a flight are likely to be already covered through an annual or household policy or their credit card.

However, a report by BDRC found 25% of travellers did not arrange any travel insurance for their last trip. Mondial estimates it is actually nearer 50%. The firm suspects travellers go uninsured because they do not fully understand the policy being offered to them or the type of coverage they need. In fact, some are put off by the myriad insurance options on the web, says Hook, who notes that there are at least 100 websites selling insurance even though there are only a handful of licensed underwriters in Britain.

“Other consumers simply see the price of their trip building up and don’t see the risk element,” says Hook. This is despite the fact that insurance sold online is often cheaper than over the counter as the costs involved in administering the policies are reduced.

Journeys Travel Insurance, which is one the leading providers in the UK market for travel agents and has its own consumer site, Insuremore.co.uk, has adapted its business model to suit the growth of the Internet.

Its trade-only product allows agents to log in through a secure website during a sale and purchase insurance packages. Managing director Patrick Chong says even with the increasing amount of unbundled holidays, where consumers are choosing components individually, business has not been affected.

“We developed our software to let agents utilise our online system, which also includes online admin/accounts and medical screening for more than five years,” he says.

“We have been able to maintain growth consistently to date.”

Although about half of the travel insurance purchased in the UK is bought online, with only 35% of sales coming from the travel trade outlet, there is still plenty of room for growth, says Adam Finch, commercial manager for Preferential Insurance, which underwrites policies sold on BA.com.

Finch estimates that only about 20% of travel insurance sales were conducted via the Internet in 2005. Jonathan Cooper, head of travel for AIG, which supplies policies sold on Opodo among other leading online brands, agrees the average maximum conversion rate on insurance sales is between 20% to 25%.

The most successful method of selling insurance online is to fully integrate the insurance sale in with the cost of the holiday and give travellers an ‘opt-out’ option. This way, once the customer has selected their holiday, insurance is automatically included in the purchase price based on the destination, duration and number of people travelling.

Expedia has a dedicated insurance tab on its site and also offers insurance to customers who purchase through the flight and package paths.

Lastminute.com automatically includes insurance on all purchases and customers who ‘opt-out’ the first time get an insurance option on the itinerary confirmation page. Lastminute.com recently added the option to buy insurance on the pre-departure e-mail, a tactic it hopes will boost attachment rates.

Lastminute.com holidays and flights director John Bevan says the insurance option is the most clicked-on link in the pre-departure e-mail.

“The real driver to selling insurance is to make sure it is part of the holiday package,” he says.

The way insurance products are presented to consumers will become even more important as the online agencies (and airlines) continue to beef up their dynamic packaging portfolios and create a one-stop-shop.

The online agencies already observe a far higher attach rate on insurance from dynamic packages than on flight-only purchases. Opodo’s Roe says the conversion rate on flight-only sales is about 20% to 25% while it can be as high as 50% on dynamic packages. Lastminute.com and Expedia see a similar pattern.

This is most likely because this type of booker is looking at multiple agents and providers for all elements of their trip. There is also more at stake in terms of the value of the purchase so people want to make sure their investment is protected, says Roe.

Insurers and online agents are also trying to appeal to travellers by offering special-interest coverage. For example, insurance provider P J Hayman and Company recently launched an online travel insurance policy, 24/7 Travel Insurance, that covers deep vein thrombosis in addition to the standard trip-related incidents.

Lastminute.com, which already offers insurance products above the bog standard trip cancellation and medical coverage, will this summer introduce an annual policy option and a family-priced policy. It will also launch a travel checklist, which will remind travellers to make sure they have insurance and their Government-issued European Health Insurance Card. Lastminute.com is considering other ways to make travel insurance more user-friendly, such as adding pop-up windows that list the top reasons for buying travel insurance.

“Selling travel insurance is part of what we should be doing,” says Bevan. “People’s confidence in booking online has become so high that they don’t necessarily realise the dangers of not taking out insurance.” At the same time, he adds, “offering insurance helps us build customer loyalty and trust in our brand”.

The brand effect

Prior to January 2005, travel sellers were allowed to private-label insurance policies, so the insurance company’s brand was virtually invisible to clients. Under new regulations passed by the Financial Services Authority, travel sellers are restricted to selling private-label policies during the sale of holiday packages. The logic is that where the insurance is dynamically packaged there is a clear audit trail between the insurer and client.

The law has dampened insurance sales through online travel sites to the tune of about 10%, according to estimates from the UK’s leading insurance firms. There are a few reasons. First, the more clicks a consumer has to make the less likely they are to make a purchase. Some studies estimate for every click a customer makes, a site loses 30% of potential buyers.

The second reason is the sudden switch in brand. Where prior to January 2005 a consumer would see Expedia travel insurance, for example, they now are redirected to the insurance company’s website, which may or many not be a brand most consumers recognise.

Insurance companies are now trying to make their sites more user-friendly, keeping the policy jargon to a minimum, and maintain the same look and feel as their travel partners’ websites.