Phocuswright Europe: Tech is turning travel insurance from a 'grudge purchase' to a happy one

Pattern Insurance predicts embedded cover and automated no-claim parametric pay-outs are set to become more popular over the coming decade as online bookers demand a more relevant, simple and rewarding experience

Advances in technology will turn travel insurance from a “grudge purchase” to a “happy purchase” just like the buying of the actual holiday.

According to specialist B2B policy provider Pattern Insurance travellers are looking for travel brands to provide then with more relevant and intelligent embedded insurance.

The COVID pandemic has fuelled consumers desire for protection with Google Trends data indicating searches for travel insurance hitting the highest level as travel returns for 12 months.

Pattern Insurance is a leader in the technology that is allowing insurance to be sold as part of the holiday purchasing flow and in a more tailored way than traditional price comparison sites.

The problem for the travel insurance industry is that polices are sold on price and so providers incentivise for volume sales meaning travellers rarely choose the cover that’s right for them.

This means policies have multiple exclusions which holders only realise when they try to make a claim exacerbating negative feelings towards what was a “grudge purchase” in the first place.

Embedded insurance is being driven by data and technology innovations opening up new forms of cover and services like instant no-claim compensation for poor weather or delayed flights.

This is known as parametrics, a type of insurance triggered by an objective event, and while it has been used in the reinsurance sector for many years is now entering the consumer sphere.

The objective event is measured by a third-party which measures something quantitative, and the insurance is automatically triggered if the quantity crosses a predefined threshold. 

Unlike traditional insurance products, parametric insurance is fully automatic so there is no need for the customer to initiate a claim for compensation. 

Amnon Keiny, product director at Pattern Insurance, said: “Most people know they can’t do without insurance, but they’re not too enthusiastic about having it either because of the hassle that comes with it; it takes time. 

“Parametric is the opposite of that. The customer just buys it, and from that point on, they are taken care of. 

“If the objective event happens, the customer gets the money immediately with no questions asked. There’s no need to make a phone call or file any documents.”

Keiny expects ever greater adoption of this type of insurance over the coming decade thanks to new agile insurtechs who can respond faster than traditional insurers and close the gap between those that travel with protection and those that do not. 

He said: “With the more widespread adoption of the Internet of Things, and everything is more connected, there’s room for more types of insurance to become parametric. Eventually, we’re likely to see every type of insurance working like this.

“It’s going to take a long time for insurance to go fully parametric, but in the coming decade, the products and availability will grow. 

“It will switch from being viewed as the latest innovation to something that consumers look for, and with that consumer demand will come more widespread adoption.”

Pattern Insurance offers up to 60 different “modules” which can be bundled together to suit the particular travel product being bought.  

It works with travel companies to embed the offer and selling of insurance at the optimal point in the booking flow to improve conversion not just of the policy but the trip itself.

Artificial intelligence is used to determine what is required in the policy, for instance if the booking includes hold baggage or not cover can be added or left out accordingly.

If a booking is for a family an appropriate policy can be offered automatically and the consumer can then tailor it to include optional elements like gadget or activities cover.

Louise Robertson, global marketing director, said traditional insurance products are cheap or have large excesses for a reason. 

“It needs to be more about adding insurance as part of the overall value proposition,” she said.

“Young travellers want to book everything in once place and on their phone, so you have to embed insurance in the consumer journey.

“If you throw insurance in at the end of the booking flow you do get conversions, but if you put it through the whole value chain the uplift can be in double figures.

“For large household names, we see conversion rates go up by about 8%. You can start small, you don’t have to put it everywhere, but make it really relevant to you customer.

“Make it easy to buy and make it affordable. It can be much more affordable because it’s relevant to you as a customer so you’re not paying for cover you don’t need.

“Most online travel agents have sold travel insurance at some time but they don’t want to go through a broker, they don’t want to lose the customer off their site.

“A holiday is a happy purchase, and let’s be honest buying insurance is a grudge purchase. If you throw customers off to a site that’s a grudge purchase you’ve lost them.”