The world over, powered by pent-up demand and ‘revenge’ travel in the wake of the Covid pandemic, there has been a travel resurgence. This is no less true in the Middle East, where the tourism sector will be worth US$246 billion in 2022, according to research by the World Travel and Tourism Council, just 8.9 per cent below pre-pandemic levels.
Airports have never been busier and key airline players are fast returning capacity to pre-pandemic levels. Whilst inflationary pressures and economic concerns exist, not helped by geopolitical issues, the outlook for travel is extremely positive in the region and there has never been a better time for those concerned with providing travel protection and insurance products to travellers, to capitalise on the opportunity that this presents.
Increasing recognition and consumer demand
Historically, demand for travel insurance and related protection products has been less in the Middle East than in more mature markets, with penetration likely running at less than 10 per cent.
A combination of factors has contributed to the low penetrationrate - not least cultural and religious factors - but beyond this, many travellers, and in some cases the travel trade, simply do not understand the value of travel insurance, and the consequences of failing to properly protect themselves during a trip. Travel insurance is seen as an administrative function to acquire a Schengen Visa, rather than seen as a necessary and valuable protection product.
Whilst Covid-19 was devastating, the pandemic demonstrated to the customer and to the travel trade the value of travel insurance and protection products. This is potentially a game changer and moving forward, we can expect conversion levels and therefore premium volume to exponentially rise. In fact, the beginnings of this trend that can already be seen.
In several markets in the Middle East, authorities have made travel insurance, including cover for Covid-related medical risks, compulsory to enter the country and the issuance of a minimum level of protection is a requirement of the visa application process.
Plus, the corporate buyer is increasingly looking to ensure that their duty of care requirements are fulfilled to their employees through group master policy umbrella arrangements, a practice that had no real traction pre-pandemic.
Finally, distributors of travel insurance, including the travel trade, have recognised the importance of providing the customer with travel insurance protection, and additionally, the ancillary revenue stream that this has created is increasingly being seen as a valuable source of revenue.
All of this is good news for the travel insurance community and significant volumes are being driven, but the real question is how to keep the momentum in the long term after the ‘Covid effect’ has worn off?
Push not pull: Insurance is a push product for the most part, and travel insurance is no different. While consumers in more mature markets now consider the purchase of a travel insurance policy as a necessary part of arranging travel, that didn’t happen overnight or by chance. The consumer was consistently offered a product at the point of sale by the travel agent and, over time, became educated, or perhaps even conditioned, to buying protection. To some degree, we now see consumers actively searching for products and buying directly in mature markets, and the customer actively searches out the best value and [hopefully] the most suitable product for their needs.
we now see consumers actively searching for products and buying directly in mature markets
But that’s not the case in emerging markets like the Middle East, where the travel trade has a significant role to play in educating and ‘pushing’ the customer towards travel insurance as part of the booking process. Successful travel insurance providers will work closely with distribution partners to ensure the necessary sales management is in place to offer travel insurance to the customer every time a booking is made. That takes good sales discipline and monitoring, and requires strong performance management, as well as consistent education of the travel trade and front-end sellers to make sure that they are clear on both the benefits to the customer and to their business.
Smart travel insurance providers will work closely with travel trade management to ensure close monitoring of sales to ensure the travel insurance question is always asked of the customer, and to invest in greater education of the travel trade in the middle east to ensure frontline staff understand the importance of travel insurance and are comfortable to ‘push’ it to their customers and manage objections, every time, on every booking.
Build products that the customer wants to buy
As we know, myriad risks are covered by a travel insurance policy, and when the worst happens to an insured customer, the policy will operate to cover the financial loss and provide valuable assistance. That’s all well and good for customers that need to claim, but as we know, only a very small percentage of consumers ever need to claim. This of course sits with the principle of the premiums of the many pay for the losses of the few, and economically, this is the way Insurance has to operate for the underwriter to make any return.
The key problem this causes is that most customers never touch the product and experience its benefits; almost like selling a Ferrari to a customer that doesn’t drive, they don’t see any value in the proposition. As an industry, we must look for ways to more positively engage with the customer and provide more opportunities for the customer to ‘touch us’ outside of the point of claim. This is no easy task, and I don’t pretend to have all the answers, and likely wouldn’t share in this forum if I did! But the most successful travel insurance providers will find solutions to increase customer touch points and add value to the customer experience and journey outside of the point of claim. Increasing frequency of value-add, non-claim-related benefits, while keeping frequency of financial claims low, will be key to future success.
Be accessible and customer-friendly
Embedding the product into the customer journey will be key to success for insurers. There’s nothing new in this approach – airlines and online travel agents have been doing it for several years on their B2C websites. But making the product easily available to distribution partners, including traditional B2B travel agencies who remain, at least in the Middle East, the key point of distribution for travel insurance is important. Finding ways to connect and integrate the travel insurance proposition so it is easily available with minimum hassle for the travel frontline reseller will drive volume. Even better if, through integration, propositions can be tailored to fit what the customer needs based on their booking characteristics. Smart providers of travel insurance will increasingly tailor pricing and product using available data to drive conversion rates.
In summary, the opportunities in emerging markets, including the Middle East, are significant for travel insurance providers; better penetration rates will drive more new customers to buy travel insurance, growing volume and profit. Making the purchase of travel insurance easy and available through using integrated technology for both the customer and the travel trade is key to future success, as will serving up products that travellers want to buy and value, rather than pushing out ‘same-same’ risk-based product. The market is set for growth, we just need to approach it in the right way.