First published in ITIJ 102, July 2009
Is there any such thing as brand loyalty when it comes to travel insurance? Gary Andrews discusses the transition of the travel insurance markets, insurers’ brand values and how they have changed, and the challenges insurers are faced with during these current economic times
In today’s economic environment of business vulnerability and low consumer confidence, travel insurers should be asking themselves how their brand values are perceived, or even factually understood, by their business partners and the consumers they deal with, especially now there is more choice of products and services from providers than ever before. However, despite being in the midst of a global recession, different countries have had a slower entry to the gloom than others. Exposure for the Canadian market in particular has been slow, due to its robust banking infrastructure, which has preserved its economy from the initial ‘shocks’ of the credit crunch. Nevertheless, its economic relationship with other ‘suffering’ countries has now started to have an impact. The US market, which was the catalyst of the global crisis, now appears to have fewer economic surprises, but the UK is still taking a severe hit due to its high dependency on financial institutional business.
Liaising with major travel insurers and clients in these particular countries has revealed some interesting reactions to the business challenges that currently exist and the effects on brand loyalty. Brand values and strong brand loyalty occur when a consumer or business client forms an emotional connection to, say, a travel insurer and its brand because they like what they see when it comes to its customer focus, business integrity, financial strength, innovative approach to product development or use of technology. All of these qualities are built around an insurance provider’s established culture, and of course most of us will know that culture is ‘people’; if a company’s employees either don’t understand or don’t live the values, that company shouldn’t expect clients or consumers to believe its statement on brand values. People need to experience brand values to believe them.
If insurers today were to have only one brand value, it should be to know their clients’ business, goals and objectives, and to understand what their clients and customers believe in.
So, how are travel insurers responding to the economic challenges that exist and how are they rising above competing threats? Before sharing some interesting findings, it’s important to remember where the travel insurance industry has come from.
Historic brand values?
I have been part of the travel insurance, assistance and leisure industry for over 15 years now, gaining experience and expertise in many countries during this time. Looking back, it’s important to remember the historic attitude of some underwriters in the mid 1990s, when brand values didn’t even creep into a travel insurer’s vocabulary. I entered the industry at a time of major transition, when the UK market in particular was going through a significant sales distribution shift. Travel agencies were the most synergistic distributors of travel insurance – and they still are – but generally speaking, their main focus was selling leisure experiences, with travel insurance a byproduct that was sold in various ways, with significant commission benefits that either supplemented profits or were in fact the main profit generator. Regulating sales of what is a complex product was problematic, and understanding of customers’ needs was limited. At the same time, newer distribution channels such as affinity groups, banks, and of course direct sales were becoming much more aware of these needs and started to erode the travel agencies’ market share. It was only a matter of time before consumers realised that a wider range of products could be obtained elsewhere, with competitive pricing to match; and the demise of UK travel agency insurance sales began.
Travel underwriters during this time had a similar mindset to the travel agencies. Brand value and service commitments were inconsistent and not fully understood, and practices existed whereby underwriters, attracted by the aroma of large scheme premium, ‘bought’ business, promised the earth to clients and then were inconsistent in managing expectations. Data and management information was a hoped-for, but not a required, luxury. Furthermore, brokers or intermediaries of one country tempted underwriters of another into risks they didn’t understand until they we were ‘burnt’, before moving on to another unsuspecting foreign underwriter. This, naturally, led to reputational damage, not just to the broker, but to the wider industry, and ultimately affected the client and consumers.
For the best part, these days have gone. The industry is smarter and more professional, with regulated controls and a changing mindset to meet business and consumer needs.
Economy vs brand values
If insurers today were to have only one brand value, it should be to know their clients’ business, goals and objectives, and to understand what their clients and customers believe in. Knowing this enables an insurer to benchmark itself and assess how successful it is in achieving this goal.
Maureen Ondrus, vice-president of marketing and membership at the Alberta Motoring Association (AMA), one of the largest and most progressive members of the Canadian Automobile Association (CAA), believes: “Developing a relationship of trust with the members, built on integrity and respect and an orientation towards service excellence, has kept us growing for over 80 years.” She told ITIJ: “AMA conducts research on a regular basis that has consistently indicated that its members find AMA reliable and trustworthy.” Further, she believes that ‘AMA members [also] care about the integrity and reliability of their insurers … as they make choices about who they would like to deal with’.
the affinity brand values associated with snowbirds are very strong
Growth of travel insurance business is important and profitability should be essential, but with so many unpredictable dynamics – including the consequences of fluctuating exchange rates on loss ratios, consumers preferring to spend money on short-haul or domestic travel, tour operators going out of business, the cost of regulation compliance, major financial institutions bordering on collapse that have been bailed out by governments, and more recently, the public relations consequences of whether swine flu cancellations are covered or not – it all makes for a fascinating industry. A number of insurers and intermediaries from the UK, the US and Canada were asked how they see their brand values, how they may have changed during the current economic crisis, and whether they now match the typical AMA brand expectation. Those that were asked shared some interesting points, as are revealed below.
The UK market
Travel insurance is fast becoming a Web-only product in the UK, with all distributors of the product – banks, affinity groups, retailers, the travel trade, and so forth – using the Internet as a key source of sales, due to ease of access for consumers and the obvious cost savings for sellers, which is important on such a low premium product. Web use in the UK is not just for the sprightly minded X or Y-generation young things, however; it’s well used by the ‘silver surfers’ too, all of whom have various expectations of service, price and product match (depending on the source of their purchase).
Andy Juggins of AIG (UK) believes that it’s really only the banks and retailers who care about the insurer’s brand, but isn’t sure whether the travel trade does. Thus, he said, AIG ‘only wants to deal with reputable companies that are either regulated by the FSA or who are fit and proper to become appointed representatives. Juggins went on to say that brands that emphasise quality and value are more attractive than purely price-led brands. It is also clear, he stated, that insurers are shying away from certain client types unless a reasonable profit can be made.
AIG is one of the main travel underwriters in the UK and as a global company was recognised as the largest insurer in the world at one stage, but it is now going through a major financial restructure and is being propped up by the US government. So, surely this will have had an impact on UK travel sales for AIG? Juggins insisted that ‘the whole matter had been hyped by the newspapers and blown out of proportion. This, of course, may be true from a UK perspective, but in the US it’s having a totally different impact – but it’s the consumer that ultimately decides.
It is apparent that during the past 12 months of economic uncertainty, the security rating of a company has become extremely important to clients and consumers. Further, the economic downturn is leading consumers towards ‘cheapness’ rather than ‘value’, so an insurer’s brand may not even matter to a consumer at this point; but even in more stable financial times, it’s commonly accepted that for some customers, travel insurance is more of an enforced purchase rather than a selected one.
Insurers who have the ‘required’ brand values to attract travel insurance sales via banks and who can support the varying demands of bank customers and their service expectations will benefit from the recession-proof characteristics of products sold by the banks. Annual business will be safe for a 12-month period before consumers convert to alternative single-trip products, if consumers travel at all! And, of course, embedded travel insurance coverage with credit cards is likely to be more profitable for underwriters, as a premium per card will still be received, but cardholders are less likely to travel, claim frequencies will be lower and average claims costs will also reduce with a bias towards short-haul travel and less US medical claims activity, for example, all of which should improve loss ratios.
The UK market is complex and mature, yet confusing, and is becoming even more heavily regulated, so much so that it can be baffling for consumers as to what to buy and from whom. Brands of insurers and brand values of business partners can be blended into one, and it may therefore be difficult to determine who exactly is behind the product. What is more apparent now is that while ‘cheapness’ is becoming even more of a dominant factor affecting purchase, brand values run the risk of deteriorating, and travel insurance will become even more of a commoditised product.
The US market
According to the Travel Insurance Market Survey, conducted by the US Travel Insurance Association (UStiA), the sale of travel insurance via a travel provider or travel agencies in the US accounted for 74 per cent of total travel insurance sales revenue during 2007, and 73 per cent in 2008. This highlights the stability that exists within this distribution channel – the total opposite to the UK market. However, the survey also highlighted that the fastest growing area of distribution is through online channels including agencies, airlines and Internet aggregators.
Internet aggregators are an interesting development, creating product and price comparisons with top-brand named insurers. I asked Peter Evans, executive vice-president of Insure My Trip (IMT), an insurance aggregator that claims to be ‘the world’s most popular travel insurance site’, how important brand is and why. “Brand has always been important to a sub-set of travel insurance buyers for different reasons,” he said. “Some customers have had positive experiences with an insurer in the past and become brand advocates. Others have had a good purchase experience with an insurer or a retailer such as IMT and return for subsequent purchases based on those experiences. We have also noticed an uptake in customer interest in AM Best ratings of specific insurers … while not brand specific … it is likely to lead to an increase in brand favoritism.”
That said, it has been found that customers who have not had to make a claim or who don’t have a memorable purchase experience are less likely to remember the brand. The 2006 UStiA survey found that 77 per cent of travel insurance purchasers did not even remember the name of their insurance carrier. IMT’s customer care staff have noted that consumers with the greatest interest in insurer brand tend to be male and in the 50+ age range, and they tend to ask specific questions linked to the name of the insurer quoted, which certainly implies an interest in the underlying financial security of the product rather than other brand attributes. Comments from the broader insurance or intermediary arenas have strongly confirmed that the brand name value of insurers has changed during the past 12 months, and they feel this is specifically linked to negative press about AIG. Whether or not the negative press is relevant to the financial health of the insurer, customers are now taking a second look.
Internet aggregators are an interesting development, creating product and price comparisons with top-brand named insurers.
Nevertheless, Web brands and aggregators such as IMT have themselves experienced ‘fierce loyalty’ and ‘strong brand affinity’. According to Evans, ‘more than 40 per cent of transactions are from repeat customers’. And in a company customer satisfaction survey, ’50 per cent [of respondents] indicated that they usually shop and buy from IMT, mainly linked to the ease and speed of the purchase process, the selection of plans and providers, and/or pricing’. So, are insurers’ brand values being replaced by online solutions from aggregators who offer greater choice of product and pricing? Time will tell, and again, consumers will decide.
The Canadian market
The economic impact has been slower to hit the Canadian market, mainly due to the conservative banking policies and legislation that exists in Canada. But, as mentioned earlier, the economic gloom is affecting consumer confidence now, its impact being felt from the end of last year. The trend prediction from Desjardins economic advisers, however, is that the gloom will start to lift towards the end of 2009, with the green shoots of recovery appearing by early 2010. The bottom line is that Canada is predicting a quicker exit and a speedier economic recovery, whereas the skeptics feel that it will be a regular moving target.
The dominant travel insurance distributors in Canada are travel agents, tour operators, banks and affinity partners, with a growing direct/Web sales distribution. Although the latter is relatively small by comparison, it is the fastest growing distribution channel, with double-digit growth seen during 2007 against 2006. The strongest signs of this success can be seen in Quebec, where both Desjardins and Blue Cross have a large general insurance business in direct distribution, which includes travel insurance; but other provinces have not been as aggressive, yet.
On the whole, though, consumers in Canada are becoming more confident with the access to information, security of data, and ease of navigating through financial products afforded by the Internet. As elsewhere, they are looking for product choice and competitive pricing and services. This is supported by Travel Insurance Coordinators’ (TIC) vice-president of sales and marketing, James Arnold, who says: “Clients trust Web insurers, given the increasing sales from this market segment. Most insurers now have a Web presence and offer a full range of products.” However, it is clear from TIC’s website that they still encourage consumers to contact local agents or intermediaries in order to progress a product purchase.
Web sales will be a booming distribution sector during the next five years, as consumers constantly seek product choices, pricing options and service that meets their needs. This will, in turn, threaten the grip that conventional distributions have on the sale of travel insurance. Flexible technology will make Web sales succeed, so long as it’s aligned to the consumer and reflects their lifestyle needs.
It is not clear yet, however, who will put their head above the parapet and become a major, national Web sales provider. Interestingly, the Canadian market is almost at the point where the UK market radically changed a little over 10 years ago. At that time, insurers in the UK held back from jumping onboard with Internet technology, as they didn’t want to damage existing relationships with major business partners, but at the same time, they could see Web sales/direct distribution growing and they wanted to be part of it. Hence, today, most insurers in Canada have a Web presence, but who will rock the boat first by being proactive and aggressive within this distribution channel? Will brand values of insurers remain the same or will they have to change with Web sales activity? How can a consumer be emotionally engaged via a website? We all know it can be done, and done successfully, but there is little evidence In Canada at this point of innovative brand values being shared or communicated with consumers who would prefer to use this purchase route.
Interestingly, Manulife Financial has a web brand that blends travel insurance as part of other health and life insurance products, but will this cause brand conflict or confusion for consumers who have products from Manulife in different distributions? Probably not, if its sales, marketing and communication strategies are clear. Maybe Manulife’s claim of being the largest insurance company in North America is something that will give them dominance in most distribution channels, with little repercussion on other business partners they have relationships with.
The other major force that is affecting travel insurance sales is the power of the affinity partner, especially associated with niche businesses and memberships. For example, the affinity brand values associated with snowbirds are very strong. Groups such as the Canadian Snowbird Association and the Canadian Association of Retired Persons have brand values that are so influential that even if they changed their insurers, the members would still continue to be loyal to these affinities.
Regarding the brands of the major insurers in the conventional travel insurance market, John Hillis, head of client strategy at RBC Insurance, said: “In financial services in general, overall brand and consumer loyalty ratings across the industry have seen downward pressure since the financial crisis started. Clearly, some of the more well-known brands such as RBC have weathered the storm in terms of attributes like ‘stable and secure’ and ‘trusted’, based on proprietary studies of Canadian consumers versus competitors.”
It is not clear yet, however, who will put their head above the parapet and become a major, national Web sales provider.
Similar comments are shared by Jasmine Mangalaseril of Manulife Financial, who told ITIJ: “Trust, financial strength and stability are of utmost importance for all our policyholders as well as distributors. Our distributors and business partners value our brand’s financial strength.” Financial strength as a key brand value seems to be a recurring theme amongst Canadian insurers. Mangalaseril continued: “To be trusted by a consumer, the brand needs to be large, stable, experienced and relevant.”
But let’s come back to the comments of Maureen Ondrus, where she states that for the Alberta Motoring Association, although financial strength is important, so is ‘product innovation, business integrity, providing member/consumer service excellence and working with partners to consider new ideas, approaches and best practices’. For me, these are fundamental brand values for insurers, but again they need to be believed and delivered rather than just talked about.
In conclusion, some international insurers are trying to be all things to all people and to all distributions – a task that requires a lot of juggling. Some insurers’ brand values concentrate more on satisfying customers during the claims experience. The fact is, of course, that if claims frequency is five per cent, this simply means that 95 per cent of consumers don’t experience claims service. If concentrating on the sales/purchasing experience, then what happens afterwards?
In such turbulent times, the winning brand of an insurer should be robust and secure, demonstrating strong ‘client needs’ awareness, creativity and providing service and technology solutions that support these goals. It can then surprise clients and customers with ideas that exceed expectations. If these qualities are attainable, then surely the answer to ‘winning’ is easy – so why make it complicated? It is clear that the maturity and stability of the three markets profiled are distinct in many ways. There is a lot to learn from all three geographical markets, ranging from the mistakes to the opportunities.