First published in ITIJ 109, February 2010
Diane Glon, staff writer on Business Monthly, the magazine published by the American Chamber of Commerce in Egypt, examines the trend of combining insurance and assistance services under one roof, and what this means for the customer.
You’re about to go on the vacation of your dreams; the ticket is booked, the hotel and car reservations are made; and a list of all of the things you want to do during your long-awaited getaway is planned. All that is left to do is purchase travel insurance in case of an emergency or accident whilst on your holiday. Some of the obvious questions you might ask yourself before signing contracts with an insurance provider are: is this insurer reliable? How much coverage do I want? What kind of package will be best for me, given where I’m going and what kinds of activities I’ll be undertaking? How quickly will I be taken care of if I, or someone I am travelling with, gets hurt? How much am I willing to spend on the policy? There is, however, another equally important question that should be considered before purchasing travel insurance, namely is it better to be insured through an insurance company alone, or with a company that houses both insurance and assistance services under one roof?
There is no clear-cut answer to this question, but a discussion of the issue does shed light on whether or not there is a growing trend for businesses to house insurance and assistance companies together within one company. The benefits of housing the two together are significant and many, yet it would appear that despite the noticeable benefits and advantages of housing the two under one roof, some insurers or assistance companies still refrain from adopting the trend. What are the reasons that might stop an insurance or assistance company acquiring the other and providing both services as one company? Will those reasons stall the trend, or do the benefits outweigh the disadvantages? Is the combination of both services in one package a pattern that travellers and insurance seekers can expect for the future? Is it a global trend, or exclusive to specific regions?
A growing trend?
As far as Helmy Tanahi, chairman of Connex Assistance Middle East, is concerned, the trend is growing but is certainly not a new one. “Assistance as we know it began in the 1970s under the same roof as insurance companies in France” says Tanahi. “Later, independent assistance companies started to emerge to address the needs of other insurance companies who did not have an assistance platform,” he continued. Diana Sharp, head of medical operations at Europ Assistance South Africa agrees, but points out that the trend doesn’t apply to the entire globe. “This seems to be true in Europe, but not in South Africa,” she says.
"size does matter in the case of insurance companies seeking to provide successful, reputable assistance services"
The same holds true for the Middle East. Tahani states: “The assistance industry as a whole is new to the Middle East, and certainly to Egypt.” Tanahi’s premiere assistance company, which launched the CONNEX Corporate Healthcare service for local Egyptian and international businesses in August 2009, is one of the first examples of a Middle Eastern company that houses both services under one roof.
It would seem, then, that size does matter in the case of insurance companies seeking to provide successful, reputable assistance services. “There are only a handful of assistance companies operating regionally, and most based in Egypt are comprised of a limited number of personnel with limited infrastructure and scope of work,” says Tanahi. On the other hand, he states: “In Western European countries, all the major insurers have an assistance division.” These recognised, well-known big insurance providers will usually physically house the assistance side of their business within the same building, he continued. If not, “they will [certainly] have a very intimate relationship through a direct contact methodology.”
Daniel Durazo, director of external communications at Mondial USA, a part of Mondial Assistance, suggests that perhaps one of the reasons why housing both insurance and assistance services under the banner of one company may not be widespread yet is because the creation, organisation, and proper functioning of a high-quality assistance service provider requires a substantial amount of human and technical resources that an insurance company may not have at its disposal. These include staffing and maintaining 24-hour hotlines with a large number of skilled, multilingual operators who are experienced in handling travel-related problems and accidents. Durazo explains that finding these kinds of professionals, as well as experienced medical service providers who can answer medical questions on the spot and refer customers to facilities knowing the limitations and restrictions of various countries, is very difficult, yet entirely necessary for a fully-functional assistance company. Durazo also notes that acquiring the relevant skills and knowledge of various countries is difficult, and may discourage expansion of a company to include assistance services. Additionally, it may simply not be possible for smaller companies that do not possess the required resources, capital and time, especially in light of the competition that they will face from bigger, well-established brand names. Consequently,” says Durazo, “assistance [services] are outsourced to other businesses.”
Durazo clarifies that Mondial USA and its mother company, Mondial Assistance, can successfully maintain both services because of its pool of resources and the scope of its reach – the company has 9,000 employees based in 28 countries. This kind of staffing, combined with reliable and modern technical equipment, allows those who work for assistance companies to respond to customer questions and concerns correctly, and execute execute contracts and process claims quickly. Sharp concurs, adding that “ … there are really no winners unless the insurance company is able to purchase or set up a very efficient assistance company.” She adds that since the assistance side of the business is not their central focus, it is unlikely for insurance companies or their clients to benefit from housing an assistance company under their roof, since they will most likely not be able to amass all of the needed resources in the most efficient way possible.
Communication and co-ordination
Co-ordination is another element that must be considered when discussing why, or why not, insurance companies are increasingly offering assistance services. On the one hand, some industry experts say that putting the two services in the same space increases co-ordination and decreases error. “Inconveniences [from independent insurance and assistance companies] usually arise from verification of insurance; policy range; limits; franchise payments; and claims verification,” says Tanahi, who believes that: “All these factors are solved faster and easier whenever both insurance and assistance companies operate under one roof.” He continued: “At the most basic level, it [the trend to house both services] improves the client’s service-response time, and that is critical to satisfying your traveller.” As long as both sides can co-ordinate and communicate in such a way that claims and issues can be processed and clarified quickly without mistake, customers will surely stand to gain.
Likewise, Durazo says that combining the two services under one roof allows for “super co-ordination [and] maximises what each individual service can do.” He also points out that having both services together, besides maximising services, minimises losses and error, saying: “You can lose oversight if the services aren’t connected. If you’re handing off or outsourcing the service you lose some control.” Yet at the same time, Durazo points out that the possibility for inefficiency and consequent mistakes to arise, especially within a very large company, must be recognised. This reinforces his and others’ beliefs that careful co-ordination and constant communication between both entities is absolutely necessary for the benefits of connecting the two under one overarching authority to be seen. Thus, it would appear that while the benefits of housing the services are attractive, they are conditional; without the resources, the capital, and the communication, housing both may not be effective enough to be advantageous to either the company or the customer.
"some industry experts say that putting the two services in the same space increases co-ordination and decreases error"
Mondial’s reaction to the H1N1 virus is a case-in-point. Durazo remarks that the insurance side of the company was in constant communication with the assistance side in order to determine by the day – and even by the hour – how the health crisis was affecting their customers’ contracts, the kind of service that would be afforded to the customers in light of the new, unexpected global health crisis; how customers would be served and treated medically if they contracted the virus abroad; what facilities they could visit and be covered under; and how their coverage might change, etc. He adds that having the two services under one roof helped the teams to process claims and administer medical services to those who needed them as quickly as possible, as well as to determine the answers to these questions, harmonise and co-ordinate this information and action between both sides so each would know how to best fulfill their separate responsibilities as efficiently as possible given the constant changes and updates.
As the above example demonstrates, “ … insurance companies stand to gain from immediate interaction and feedback, the swift verification of claims through shared systems, and the ability to have up-to-the-minute information and dates on the insured,” says Tanahi. He then added, “there is also the added value of sharing infrastructure like a medical network or other service provider networks, which can work to the benefit of both insurance and assistance divisions.”
Another benefit to housing the two services together that has arguably spurred the trend in Europe and the US, for example, is the reduced cost of the services for both the provider and customer. Cost containment, including a decrease in operation costs, occurs, says Tanahi. He also states that it increases the range of services provided. Consequently, coverage increases and improves, and costs go down. “Absolutely: services will be faster, cheaper and cover more areas …” he comments. Tanahi also notes that with the launch of the corporate healthcare division within his assistance company in Egypt, cost containment has been possible and manageable, as they have managed to compliment the number of inbound customers with the vast number of local customers covered through the corporate healthcare products. “We have been able to negotiate better rates with key service providers,” he says.
Sharp, however, disagrees with Tanahi’s assertion. She points out that “assistance companies have a scale-of-numbers advantage if they make their services available to a number of insurance companies … [which] are expensive entities to operate. It is my opinion that the insurance/assistance company scenario will be more expensive for the end user.” She also states that inefficient assistance companies that are not as conscientious when taking care of their clients’ expenditures (ie the insurance companies), can fertilise the rise of un-affordable services. Ultimately, Sharp believes that the loss of the specialisation and fine-tuned expertise afforded by independent insurance and assistance companies can occur when bringing the two under the authority of one parent company. For starters, she explains, the knowledge and infrastructure required of each are very different. Consequently, combining them can pose a risk to the quality of the service granted to the traveller. “In addition,” says Sharp, “I have a concerns that the financial criteria set by the insurance company may overrule the medical recommendations of the assistance company.”
Similarly, in spite of expressing general appreciation for the merging of the two services in one company, Tanahi suggests that there are a few issues that may be holding back further widespread growth of the trend. “The disadvantages, in my opinion, are few, however, one could say the assistance [companies] may stand to lose independent insurance clients,” remarks Tanahi. He adds that assistance companies that operate independently of any insurance provider may find themselves losing business to competitors of the mother insurance company. On the other hand, he also believes that it will allow these same assistance companies to engage in a wider network of service providers, which should considerably affect cost containment.
"acquiring the relevant skills and knowledge of various countries is difficult, and may discourage expansion of a company to include assistance services"
The discussion of the trend, its advantages and disadvantages and, ultimately, why it has or hasn’t been more popular reveals that certain factors must be present for a merger of both services into one company to be successful and satisfy customers. What will determine the future growth or contraction of the trend depends on the same thing that current insurance and assistance service providers must offer their clients to be successful: high-quality, reliable and speedy, affordable services. Ultimately, the trend will benefit some but is not the best thing for everyone. “I believe that it would make sense to some insurance companies to own their own assistance companies, as this would be more cost effective. However, it is not necessarily the best solution for travellers,” says Sharp, adding that in the case of South Africa, “ … the travel industry is quite small and it is quite a large undertaking to set up an assistance company and all the networks required and, therefore, probably not a cost effective solution here.”
However, it seems that the trend, whether old or new, growing or not, boasts enough benefits to be seriously considered by those who remain independent. It would seem a somewhat easy solution given, of course, that the resources and capital are available to improve business and profits.