Growing premium income

How can insurers boost their premium income without increasing costs for customers? Kevin Featherly identifies some key approaches

It’s the ageless problem for travel insurers – getting more people to buy policies without putting too much strain on the bottom line. Insurers can’t launch products that cover everyone for everything, after all, and customers’ tolerance for premium hikes is not limitless.

Generating new revenues is no simple matter. Most of the heavy lifting on the marketing front, for instance, is often the province of travel insurers’ affinity and distribution partners – cruise lines, travel agents, tour package brokers, and so forth. Realistically, most travel insurers are virtually invisible to customers until a claim gets filed.

What to do? ITIJ surveyed travel insurance experts in the UK, France and the US to ask how they increase and retain customers while growing, or at least maintaining, premium revenue – short of boosting premiums. One key option gaining traction is direct-to-consumer sales. It is not a new idea – some travel insurers have done it since the 1980s – but direct sales still take a back seat to brokered approaches. The direct approach requires the insurer to go to the effort and expense of marketing while facing competition from upstart online brokers that perhaps better understand the digital landscape.

Nonetheless, the idea has appeal. By going direct to consumers, insurers could cut out the middleman and help the insurer build brand awareness, independent of partners.

We found three primary tracks that insurers pursue when it comes to the direct-to-consumer travel insurance market: the hard sell, the soft sell, and the (almost) no sell. This article outlines how carriers are beginning to exploit digital and social media technologies, offer new products through affinity partnerships and take other steps to reach out, build relationships and pad the bottom line.

The hard sell

For our purposes, Alan Walker represents the ‘hard sell’ approach to direct-to-consumer travel insurance. Walker is global head of digital insurance advisory for Capgemini Consulting UK, where he focuses on digital transformation. He thinks that the insurance industry, generally, must be more aggressive in connecting directly to customers. That includes travel insurance, which has traditionally been sold indirectly, often as an add-on component of travel packages sold by cruise lines, travel agents and online travel sites.

By his reckoning, those consumer relationships are not doing so well. Capgemini’s World Insurance Report 2015 found that during the survey year 2014, just 29 per cent of people said their experience with insurers was positive. Ominously, 70 per cent would consider changing carriers for a better customer experience.
Of course, insurance providers do not lose 70 per cent of customers each year, Walker notes, so that could be an empty threat. But no one should take comfort. “One of the reasons that turnover is not higher is that most insurers are pretty much of a muchness,” he says.

Most customers draw a blank when they consider seeking coverage elsewhere, so they keep what they have, he notes, but that may not be a permanent condition. “Our contention is that when one or more insurers actually do break away from the pack, that will cause a significant uptick in attrition,” Walker says.
Toward that goal, Capgemini aggressively leverages social media. Its social listening tools scan Facebook, Twitter and other social media sites for sales opportunities. Such companies use techniques like gamification – offering fun quizzes that draw people into downloading apps and exploring coverage options, for example. Capgemini’s All Channel Experience (ACE) programme is designed to take advantage of those engagements.

Social listening tools use big-data analytics software to gauge the sentiments behind key phrases consumers use in their social media conversations about travel insurance, sniffing out sales opportunities. ACE can detect, for example, when someone Tweets their negative experience with a carrier – perhaps a premium was suddenly raised, or a claim was denied while the customer was abroad. If the customer seems unhappy enough to switch carriers, ACE will launch a dialogue and, hopefully, develop a relationship with that customer by offering pitches that might generate a sale, Walker says.

social media is so integral to the insurance business at this point that trying to put a value on it is like trying to calculate ROI for the office phone system

It’s a fairly in-your-face angle of attack. The key to the strategy is anticipating what potential customers’ next moves will be. The concept is familiar to anyone who knows Google’s Zero Moment of Truth, which decrees that the most important moment in a business’ interaction is not the point of sale, but the moments leading up to purchase when a customer is still deciding. ACE tries to intercept people at that point and generate engagement to guide their final selection.

“What you are really trying to do is use social media to know when a particular individual is likely to buy insurance and to put an offer in front of them at that point,” Walker says. “If you manage to put your offer only in front of those people who are ready to buy, then you are going to have extremely low acquisition costs on average.”

The soft sell

Columbus Direct lays claim to being a top-three UK specialist travel insurance provider. It also claims it was the first British travel insurance provider to cut out the middleman and sell directly to consumers, way back in 1988. Unlike most travel insurance providers, direct sales are the company’s primary business. Its policy packages are arranged by Crispin Speers & Partners and underwritten by Lloyd’s. Like Capgemini, Columbus Direct is adamant about using digital and social communications tools to connect with the travel insurance customer. However, it treads more softly.

Rob Thomas, Columbus Direct’s head of brands and acquisition, says that his company has the ability to use in-your-face social media sales tactics. In the past it did just that, but not anymore. As Thomas sees it, monitoring social media, jumping into conversations and laying out heavy sales pitches is a big turn-off to customers. “We find that generally people aren’t really in a buying frame of mind when they are on social media,” Thomas says.

Instead, Columbus Direct uses its digital channels to encourage conversation and to serve up information. Customers can sign up for a regularly published email newsletter. They can follow Columbus Direct’s Twitter feed and Facebook page. They can read the company blog – where recently readers were offered a chance to win skiing lessons with champion downhill racer Chemmy Alcott. Crucially, customers can also share what Columbus Direct offers with their own friends, who then become prospective subscribers. What they rarely get is a direct sales pitch. Thomas thinks the soft-shoe approach pays off by generating long-lasting relationships with customers and attracting new buyers. “When it comes to the need to buy travel insurance, at that point we become really an obvious place to come,” he says.

It is a long-term strategy that probably sacrifices the immediate payoffs of a harder-sell social media blitz, Thomas acknowledges. But he has no regrets about that. “I think what we found is we ended up turning people off,” he says. “People stopped following us.”

The (almost) no sell

Attilio Battaglia is head of business development on the global travel business line for Europ Assistance, based in Paris. He represents the bulk of travel insurance companies that rely mostly on affinity partners. He calls it the business-to-business-to-consumer (B2B2C) route in which a travel agency, cruise line, vacation rental company, travel website, or even a bank, retailer or credit card company actually makes the sale.

“It’s sold as an ancillary to a travel package,” Battaglia says. “I would say that 80 to 90 per cent of the [company’s] travel insurance [sales] is B2B2C.” As head of business development, Battaglia’s main job is to grow revenue by enhancing these partnerships.

If you manage to put your offer only in front of those people who are ready to buy, then you are going to have extremely low acquisition costs on average

Obviously, that is not as short a path to revenue growth as direct sales, but it is possible to grow revenue this way, particularly when travel insurance options clearly enhance the partner’s product or service. If a customer buys trip cancellation coverage from an airline, for example, but then gets sick at the last minute and cannot travel, the airline will not suffer nearly as big a hit to its image if that customer is reimbursed by insurance. “At the end you will say, ‘I cannot travel with them, but OK. At least I got my money back’,” Battaglia says. This is a key point in Battaglia’s opinion. For travel insurance affinity partners, the relationship with the insurer is not only about money; it is about keeping customers happy. “Money is very important, commissions are very important for everybody,” he says. “But there is also consumer experience.”

That helps explain why, for Battaglia, the key to growing revenue using the traditional B2B2C sales methods is to multiply touch points. After a traveller buys a policy, for instance, an insurer can upsell insurance coverages or offer new benefits in the days leading up to departure. Cancellation coverage is one example. So is golf trip coverage that reimburses travellers for rainout days, and added coverage for risk-taking extreme sports adventurers. These sorts of upsells help build brand loyalty and customer retention for both partners, according to Battaglia.

Technology can also be part of the revenue generation picture. For instance, the insurer can use digital technologies to monitor flight delays and immediately text a covered passenger a voucher for access to a private airport lounge or to alert them that they will be reimbursed $50 for the delay. Columbus Direct is among the insurers that offer this kind of benefit, giving customers slogging through long travel delays access to the 800 Priority Pass VIP airport lounges owned by its corporate parent, the Collinson Group. “It just struck us as an opportunity where we could give back a benefit to customers without them even having to make a claim,” says Columbus Direct’s Thomas.

Daniel Durazo, director of communications for Allianz Global Assistance in Richmond, Virginia, US, says his company operates in a similar fashion, though he says Allianz falls somewhere in the middle between Capgemini’s hard-sell social media strategy and Europ Assistance’s old-school, hands-off approach. “We distribute a lot of our products through the major US airlines,” he says. “So you go through the booking path and they will ask if you want  to protect your trip with travel insurance, and there will be a box that you can check. We will get a lot of impulse purchases, if you will, at that time.”

However, Allianz is also ‘very bullish’ on direct-to-consumer marketing, which in its case is ramping up. “Our B2C business has grown tremendously over the past few years,” he says. “We have a very strong consumer website now with a lot of great content so that people can read and learn about travel insurance, as well as consider making a purchase.” Like Columbus Direct, the company has honed its content marketing skills. For instance, it has begun using a ‘content-discovery’ platform called Outbrain, which automatically populates partnering web pages with travel tips, cover options and other content directly from Allianz.

Direct sales remains the smallest piece of Allianz’s business, representing under 10 per cent of sales, Durazo says. But the company is eager to exploit the opportunity. “Direct-to-consumer business tends to be very profitable, because you don’t have the middleman in there,” he says. “You don’t have to compensate a distributor. There are marketing costs involved, so it is not all gravy. But it is an attractive return rate.”

That is likely the reason why Europ Assistance, which owns San Diego-based CSA Travel Insurance in the US, is transitioning, albeit slowly, toward direct-to-consumer sales. The US, which is a strangely immature travel insurance market, is particularly ripe for the picking on that front, he says. Why make the move? Battaglia answers bluntly: “We are moving toward B2C because we would like to have our own clients.”

What’s the ROI?

Gauging a precise return on investment for these efforts, particularly those involving social media, is a quixotic errand, sources agree. However, they also agree its tertiary value is evident. “Social media has increased awareness of cover and it has helped some brands,” says David Vincent, who manages the UK intermediated travel portfolio for AmTrust Europe Limited. “It also allows customers to raise positive EOD (evidence on demand) more easily, but also with a wider audience.” However, he adds, in monetary terms, its value is hard to quantify.

the key to growing revenue using the traditional B2B2C sales methods is to multiply touch points

Walker agrees, saying that social media is so integral to the insurance business at this point that trying to put a value on it is like trying to calculate ROI for the office phone system. It’s simply a necessary component of infrastructure, he says. “Social media is tapping into the Internet and where the conversation is happening,” he says. “So it is kind of the cost of doing business, if you want to communicate with those customers.”

Conclusion

When it comes to generating additional revenue, most travel insurance companies still rely on the traditional methods – piggybacking on the marketing efforts of affinity partners while adding coverages, perks and benefits to sweeten the deal and pad the bottom line. However, direct-to-consumer sales via social media are gaining currency.

Insurers will have to decide whether the relatively intrusive but rapidly rewarding hard-sell approach, or the soft-sell route of using digital media to disseminate value-added, strategic content and develop trusted relationships over time – or some combination of the two – is right for them.