Evolving data and analytical tools are ushering in a new era of insurance models that are more agile and responsive than ever before. There is growing potential for increasingly dynamic and accurate pricing and more individualised and precise risk assessment. While many insurers and insurtech startups are integrating these advanced models into their operations, this process isn’t without its challenges. Pain points such as legacy systems, data silos and regulatory hurdles are slowing the transformation.

For example, traditional actuarial models using statistical techniques and historical claims to estimate risk and guide pricing have long served the industry, but they simply aren’t compatible with the modern, highly dynamic risk environments of today and an ever-growing need for individual-level precision. “Without dynamic data inputs, traditional models can’t account for real-time variables like destination-specific health alerts, extreme weather or geopolitical risks, all of which impact claims probability,” explained Chris Lee, Head of Strategy and Innovation at Blink Parametric. “At the same time, customers demand a more connected, real-time, and proactive travel insurance solution.”

Darcy Rittinger, Chief Risk Officer at Cover Genius, confirmed that traditional pricing and risk models are often built on past trends and can be slow to incorporate emerging risks like cyber threats, climate change impacts, and other rapid shifts in the landscape. “This can result in underpriced policies for high-risk areas or overpricing for less volatile ones,” she said. “Without granular data analysis, traditional underwriting often relies on broad classifications, leading to imprecise risk segmentation, especially for new and emerging risks lacking historical data. This means customers with vastly different risk profiles might be grouped together, resulting in some paying more than their true risk warrants, and others paying less.”

Customers with different risk levels being grouped in the same pricing category leads to some customers subsidising others. By harnessing advanced data and analytics, insurers have the opportunity to address this imbalance and ensure that premiums better match individual risk.

Improving accuracy with advanced data analytics

Paul Aylward, Head of Underwriting at Cover-More Europe (part of Zurich Cover-More), said that advances in data tools have enabled deeper analysis and more granular-level risk assessment: “We can now review the performance of specific categories of risk and broaden the risk factors associated with the price being charged, resulting in premiums that more accurately reflect an individual customer’s risk profile. Thanks to these advancements, insurers can price with greater precision than ever before.”

Machine learning (ML), natural language processing (NLP) and predictive modelling are just some of the developments transforming insurance operations. Recent research explored the impact of advanced data analytics on insurance risk management and confirmed that the above tools had fundamentally transformed how insurers approach risk assessment, customer service and operational efficiency. But this is an ever-evolving landscape that requires continued agility from insurers and insurtechs alike.

Blink Parametric utilises vast, live data sets to dynamically assess and respond to risk. “All learnings from these extensive data sets allow partners not only to price and market products more effectively but to tailor personalised offerings based on insights on everything from top departing airports, airlines, and flight times to seasonal trends and popular destinations,” Lee explained. Indeed, by leveraging abundant data sets, insurers and customers alike stand to benefit, with improved risk control, efficiency and innovation for insurers, and personalised protection and fairer prices for customers, along with smoother processes for all involved. 

Customers demand a more connected, real-time, and proactive travel insurance ‎solution

Verisk Life, Health, and Travel, a leading provider of medical underwriting solutions, helps insurers to assess the medical risk of an individual applying for a travel insurance policy. Jack Farrall, Head of Travel, shared with ITIJ how new technologies will enhance Verisk’s ability to deliver more precise risk insights to insurers: “The integration of artificial intelligence (AI) presents a significant opportunity to enhance the granularity of risk assessment, particularly by streamlining the customer experience and reducing the need for extensive data input at the point of sale. We’re excited to be exploring these innovations within the life, health, and travel insurance sectors, and remain committed to doing so in a responsible and measured way.”

Navigating regulatory and data challenges

Indeed, such careful exploration is crucial in order to retain customer trust, maintain accuracy, and ensure compliance with regulations. Rittinger explained that insurtech companies faced a significant challenge in navigating a complex regulatory environment and said there was room for improvement.

“There needs to be robust investment in a regulatory and compliance framework that can account for a highly fragmented environment, with rules constantly changing across different regions, states, and federal levels,”
she underlined.

For insurers and insurtechs alike, fragmentation of regulatory requirements and quickly changing rules make this a fast-moving landscape that can be difficult to navigate. “Regulators are increasingly scrutinising AI-driven models for potential biases and discriminatory outcomes. Insurtechs need to demonstrate that their pricing/risk models are fair, transparent, and non-discriminatory. It’s also important that there is clear explainability in how a price is reached,” Rittinger said.

Lee agreed: “Customers expect their information to be handled securely and transparently – and rightly so. Any advanced pricing model needs to be built on consumer and regulator trust with solid data protection measures and clear value for the customer. The key is delivering innovation that builds trust with customers, regulators, and the wider market through transparency, value, and robust data protection at every step.”

Rethinking strategies to meet wants and needs

In addition to requiring the safe and transparent handling of their data, customers have further, continually evolving, expectations that are influencing insurance pricing and product design. “Customers want their insurance and financial products to feel more like the other digital services they use every day: fast, flexible, tailored to them, and in their control. This is driving insurers to rethink their design and pricing strategies to move beyond generic products and develop more AI- and data-driven models,” Lee noted.

Rittinger agreed that today’s customers are accustomed to digital experiences and expect pricing that’s personalised and directly reflects the perceived value of what they’re buying. “Customers want to understand why they’re paying a certain price and see a clear correlation between that price and the benefits they receive,” she stated. “There’s a growing demand for pricing models that are not only transparent from the outset but also clearly demonstrate and deliver the product or service’s true value, aligning what companies offer with what customers genuinely need.”

Data sharing or data privacy?

The personalisation of products relies on customers providing details about their holiday plans upfront. “As data becomes more sophisticated, insurers will be better able to understand how people spend their time while travelling, enabling more accurate pricing of health and travel risks,” said Aylward. “Of course, gathering this kind of information will require customer consent, but it ultimately allows for fairer, more personalised pricing that benefits all customers.”

A 2024 study found that 43% of insurance customers were willing to share their data. There is a balance to be struck between protecting private data and sharing personal data in order to push towards hyper-personalised pricing.

There needs to be robust investment in a regulatory and compliance framework that can ‎account for a highly fragmented environment ‎

This information sharing is something that is naturally incentivised by parametric models, with upfront transparency rewarded by improved pricing and simplified claims. “With solutions like parametric flight delay insurance or parametric weather at destination insurance in the market, customers have a strong incentive to share more details about their vacation with their insurer upfront,” Lee explained. “In return, insurers can get better control over the risk, enabling them to segment their insurance offerings beyond just destination, to include duration, behaviour, and even traveller intent, making them more innovative and personalised.”

Addressing disclosure discrepancies

There are ongoing issues surrounding disclosure, with self-disclosure leading to discrepancies. Farrall said that a key challenge was the lack of consistency in medical coverage and customer understanding of their health conditions. “This, coupled with disparate approaches across distribution, product design, and underwriting, creates confusion around disclosure obligations, often resulting in under-declared medical conditions,” he highlighted.

“In a recent survey conducted by Verisk, we found that nearly 90% of our partners identified medical under-declarations as a significant operational pain point, highlighting the urgent need for greater standardisation and collaboration across the industry to support customers through the medical risk assessment process.”

The synergy between what consumers want from insurance products and how insurers and insurtechs are delivering on this is nurturing a travel insurance landscape that is responsive and customer-centric. “Customer expectations are constantly evolving, which places a demand on insurers to provide a product where pricing or coverage was not provided previously,” Aylward commented. “The goal of all insurers is to offer customers a fair and accurate product and price based on the risk presented, and as the tools to achieve this become more sophisticated it will in turn lead to better customer pricing.”   

The outlook is optimistic

Personalisation will continue to reign supreme as machine learning and predictive analytics become more advanced. “We will see more provision of dynamic products and dynamic pricing in the travel insurance market,” said Aylward. “These offerings will increasingly integrate with travel booking platforms, allowing insurers to tailor policies based on real-time customer data. For example, coverage limits such as trip cancellation could be automatically adjusted based on the actual cost of the booking, resulting in a more personalised product and price.”

Lee said that Blink Parametric was optimistic about the future: “Demand for flexible, data-driven insurance products is growing, especially among digital-first insurers and distribution partners who see advanced pricing models as a competitive advantage. As real-time responsiveness becomes an expected standard across more lines of insurance, we believe the appetite for smarter, more personalised pricing will only accelerate.”

Ongoing success will look like the integration of advanced analytics into pricing and risk models while maintaining the human element that is key to trust in insurance relationships. By incorporating advanced tools into their operations and continuing to prioritise transparency and trust, insurers will ensure that customers will get the speed and agility they want, without sacrificing the human touch that they need.