Online purchasing and the desire for digital continues to soar. The Covid-19 pandemic was a key driver of this shift in consumer behaviour. With people confined to their homes, it was only natural that shopping digitally became increasingly popular and, today, it can be considered the new norm. And for good reason: the convenience it affords, the variety of products on offer, the ability to easily compare products and get the best bang for your buck… the list goes on. Convenience is a key ‘want’ for today’s modern consumer, including the new generation of travellers. In the digital travel insurance space, embedded insurance automatically ‘embeds’ cover within a consumer’s travel arrangements, offering that highly sought-after convenience. It is typically more cost effective too and often comes with a streamlined claims process.
“Even though embedded insurance products have been around for years … these products have exploded as consumers’ buying habits shifted to online and the use of embedded insurance products became an integrated component of a digital purchase,” said Ruth Fisk at Smart Communications.
At Cover Genius, another benefit of embedded insurance is customisation. “Companies can choose solutions that are bundled or unbundled, meaning they can be customised for different client needs,” said Peter Smith, Vice President, Strategic Partnerships – Travel at Cover Genius. “By bundling or unbundling, companies can serve up the relevant policies at critical points during the customer journey.”
Another non-traditional travel insurance solution, parametric insurance, also offers numerous benefits in the form of speed, certainty of payout and the ability to plan ahead. “Parametric insurance pays out a pre-agreed amount or service based on the occurrence of a specific event, rather than the actual cost of a loss,” said Carl Carter, Chief Commercial Officer at Blink Parametric. “This can be in real time and makes it faster, more transparent and more cost-effective than traditional insurance. What is simpler than a claim being paid out automatically in real time – without the need to find your policy wording, fill in a form or even make a call?”
Today, customers want self-service and see the days of ‘snail mail’, claim forms and even helplines as being outdated
Today’s new generation of travel consumers have needs that don’t align with the tenets of traditional travel insurance and are looking to digital innovations to make life simpler and more convenient. Gen Zs are perpetually online, with 43 per cent using online travel agencies (OTAs) to plan trips. This digitally savvy generation don’t have the time to fill out forms and wait for a claim to be processed; they want instantaneous service and results.
The wants and needs of today’s consumer
Gen Z consumers will play a huge role in shifting demand. Delving deeper into their requirements, Carter said that today’s modern travel insurance consumer wants insurance that is transparent, convenient and fast. “They want to know exactly what they are covered for and how much they will receive in the event of a claim. They want to be able to buy, manage and utilise services from their travel insurance policies online or through a mobile app and service the policy digitally in a paper-free mode. Today, customers want self-service and see the days of ‘snail mail’, claim forms and even helplines as being outdated. They also want claims to be processed quickly and efficiently. It is no longer acceptable to wait weeks or months to receive a due payment,” he told ITIJ.
Smith highlighted that consumers today are digital-first and wary of travel interruptions. “As such, they want convenient, tailored protection delivered in the right place, at the right time and at the right price,” he stated. “They want protection options embedded directly in their customer journey where they can choose what is right for them and that can be accessed just as easily on their laptop as on their phone or smartwatch.”
ITIJ also spoke with Brett Estep, Chief Operating Officer at Insured Nomads, who highlighted the consumer’s desire for control. “Today’s consumer wants more than just a warranty for reimbursement of healthcare expenses at a later date,” he said. “They need complete control of the experience, leveraging the capability of their smart device, automation and machine learning to close gaps in healthcare access and necessary information.”
Traditional insurance is falling short
Traditional insurance models have been gradually incorporating technologies and partnering with insurtechs, but significant gaps remain and digital offerings are tackling these grey areas. “Traditional insurance markets are built upon old system architecture that simply cannot compete with current technology trends,” summarised Estep.
Carter said that gaps in the traditional insurance market that have to be addressed to meet the needs of today’s modern consumer include lack of transparency, slow claims processing and high prices. “Traditional insurance policies are often complex and difficult to understand. This can make it difficult for consumers to know what they are covered for and how much they will receive in the event of a claim,” he stated. “Claims can take weeks or even months to be processed in the traditional travel insurance market. This can be a major inconvenience for consumers who are experiencing a loss. Even more so with the cost of living crisis globally, a customer wants help and, in some cases, financial assistance at the time of disruption and not weeks after an event. Traditional travel insurance policies can be expensive, especially for those with pre-existing conditions. This can make it difficult for some consumers to afford the coverage they need. Consumers want more self-service modular insurance policies where they can mix and match the benefits and services that relate to themselves, not a generic population.”
Smith agreed: “While legacy insurers aim to offer embedded protection, their technology and experience lag behind the agile expertise of insurtechs to help fill the gaps. Their technology hasn’t quite evolved to cover multiple regions and tends to follow a one-size-fits-all approach that isn’t flexible for the changing needs of the modern consumer.”
Home in on AI
At the foundation of numerous innovations in travel insurance is artificial intelligence (AI), which is being harnessed by insurtechs to streamline and enhance insurance. “We have known for a long time that a one-size-fits all approach to travel insurance just doesn’t fly, and one way that AI is changing what travel insurance means and making it more appealing to a new demographic is by facilitating personalisation,” said Smith. “Travellers and passengers benefit from personalised protection options that cater to them through AI-backed product and price recommendations. Artificial intelligence isn’t just a buzzword for us; we use it to help companies better understand their customers and adapt accordingly. It’s no longer a one-size-fits-all solution that is introduced at the onset of a partnership for a general customer profile and then reviewed again every few years. AI allows for a constant and dynamic review of what consumers want, what they are choosing and, as a result, being able to anticipate and cater to their real-time needs.”
AI allows for a constant and dynamic review of what consumers want, what they are choosing and, as a result, being able to anticipate and cater to their real-time needs
AI is also enhancing risk assessment models, as Carter highlighted: “AI is being used to develop new insurance products and to improve the claims process being used to assess the risk of a claim and to predict the likelihood of a loss. Machine learning is a type of AI that can be used to analyse large amounts of data and to identify patterns. This information can be used to improve the pricing of insurance policies and to identify fraud. Even basic forms of artificial intelligence and automated business logic are making a difference to customers today. We employ such technology in our parametric solutions and have these working in harmony for the consumer and insurer.”