Jessica Tubb, commercial director of Capacity Insights, wades in the ongoing discussion on opportunities that travel insurance companies have to meet its cusomter's needs, including FinTech and AI
Guest Post: Customers need travel insurance more than ever
Throughout the pandemic, international travel was effectively banned for almost everyone. So it should come as no surprise that the public’s appetite for travel has skyrocketed since restrictions were lifted.
According to Statista, UK residents enjoyed nearly 46 million overseas holidays in 2022, with all signs indicating that the market will have fully recovered from the impact of the pandemic by the end of 2023.
Yet the pandemic highlighted just how risky and unpredictable travel can be. Many of us had to cancel trips at the last minute as case numbers surged and governments hastily imposed new restrictions. Many may have realised, perhaps for the very first time, just how essential travel insurance can be for covering sudden cancellations and other unexpected events.
Travelling in an increasingly volatile world
It’s not just the pandemic that’s brought home the vital importance of travel insurance. In the past couple of years, numerous local and global events have hampered travel plans for millions.
At home and abroad, travellers have had to contend with widespread industrial action. In the UK, any train journey currently has the potential to be cancelled with very little notice. The summer of 2023 was also marked by some severe weather events, including the record-breaking Cerberus heatwave, which led to travel chaos across Europe.
Meanwhile, a global rise in inflation has raised the cost of living for all of us. There’s no doubt that the cost of living crisis is putting pressure on household finances and making it difficult for people to afford holidays. Yet, for the majority of UK travellers, the cost of living crisis has served to further highlight the necessity of travel insurance.
According to Mintel’s UK Travel Insurance Market Report 2023 report, 74% of holidaymakers agree that the increased cost of living has made travel insurance more important. Tighter budgets mean that any unexpected expenses caused by a delayed flight, for example, will be much more difficult to manage.
Travel has always been unpredictable, but it feels rare for travellers to face so much risk and uncertainty at once. Inflation, pandemics, extreme weather, industrial action – it all adds up. So whether they realise it or not – and the majority of travellers do – people now need travel insurance more than ever.
How travel insurance providers can help travellers get the cover they need
Travel insurance companies should use all available technology to make purchasing travel cover as simple and straightforward as possible.
Fintech and embedded brands have revolutionised the travel insurance sector through providing more streamlined travel insurance products:
Parametric cover – With this form of cover, rather than compensating customers for losses they’ve experienced, insurers will instead pay an agreed fee following a certain triggering event. When it comes to travel insurance, this triggering event could be a cancelled flight or a lost item of luggage. Or the parametric cover might come in the form of a cancellation or repatriation guarantee based on a weather event, such as a storm, a blizzard, or even a period of excessively high temperatures.
Embedded Insurance – With embedded insurance, customers can purchase specialist cover as part of a wider transaction. For example, they can get cover for cancellations or lost baggage at the same time as they book their hotel or flight, with no need to make a separate transaction with a dedicated travel insurance provider.
Travel insurance companies should strive to be as flexible and innovative as possible in their underwriting, wordings, coverage, and more. This way, they can better match their products to the needs not just of their customers, but of embedded insurance providers and fintech companies.
The emphasis should be on not just making insurance as accessible as possible for customers, but also on ensuring that tech providers can effectively deliver their products through their chosen distribution channels.
Don’t be scared of Artificial Intelligence
Artificial intelligence (AI) can make a huge difference in streamlining the customer journey, allowing travel insurance providers to offer bespoke cover with no compromises on speed or accessibility.
Here are just a few ways travel insurance companies can leverage AI to help their customers at every step of the journey:
- Machine learning tools can instantly process massive amounts of customer data, meaning that insurers can quickly tailor cover based on a traveller’s unique circumstances – their age, their medical history, and the specific trip they’re planning.
- AI can then automatically generate personalised pricing, cover, and policy recommendations based on these deep data insights.
- AI can also improve customer service. Technology such as ChatGPT can provide fast, accurate, and reliable responses to customer enquiries. AI tools can even be used to simplify complex policy wording documents, breaking through the legalese to provide short and simple summaries.
- If a customer makes a claim, workflow automation tools can speed up the process significantly. Customers can make claims round the clock, from anywhere in the world, with no need to wait for admin staff to start their shifts during working hours.
It shouldn’t be difficult to purchase travel cover
We’re currently living through highly uncertain and highly volatile times, and many of us are living on very tight budgets. Travellers are facing numerous risks, and delicate financial circumstances would make it a struggle to manage any unexpected expenses. Travellers need adequate insurance cover more than ever.
Travel insurance providers can effectively remove most of the barriers that usually prevent consumers from accessing the cover they need. They can do this with a flexible and innovative approach to underwriting, with close working relationships with fintech and embedded companies, and with an open-minded attitude towards AI and its potential.