Wasn’t it your overburdened schoolteacher who once said: “Keep it simple, stupid”? Even if they didn’t use those exact words, you’re likely well-acquainted with the concept, the implication being that simplicity is key in system design, as it ensures the greatest levels of user acceptance and engagement.
This also seems to be true when it comes to insurance. For too long, the insurance customer’s narrative has been weighed down with words and phrases like ‘complicated’, ‘expensive’ and ‘last minute’. But now, finally, with a mind to simplify, the market seems to have supplied a solution.
Enter subscription-based travel insurance. Subscription culture is everywhere; you can’t swing a proverbial cat without hitting a provider offering a subscription service: for a monthly fee, you can get access to a range of films and TV shows that you can binge to your heart’s content; sign up to one of many recipe box delivery services and leave your partner awe-struck as weekly crates of miscellaneous ingredients allow you to become the culinary genius you secretly always knew you could be; or pay a monthly premium and pick up a car whenever the mood takes you without the hassle of actually having to own one.
Indeed, the only reason many of you are reading these words right now is because some forward-thinking individual in your vicinity subscribed to get our wonderfully insightful monthly magazine! There’s no arguing with it, subscription culture is the here and now. In the insurance industry, however, it still seems to be very much in the early stages of adoption.
The birth of subscription insurance
In the final throes of 2018, Aviva launched its AvivaPlus pay-monthly car and home insurance. The Aviva team told ITIJ that the new offering boasted greater flexibility, no amendment fees and a renewal price guarantee that recognises customer loyalty. Though not travel insurance, the insurance giant’s move into the subscription sphere marked a bold step and is part of what looks to be a great transition for the insurance industry as a whole.
The travel insurance industry’s adoption of the subscription model arguably first began to flourish within the banking industry
But, in order to look forward, we must first look back. The travel insurance industry’s adoption of the subscription model arguably first began to flourish within the banking industry – the neo banking industry to be precise. These 100-per-cent digital financial institutions soon realised that in order to contend with traditional incumbents, they would have to offer something to their customers that the traditional banking model couldn’t; and so the likes of Monzo and Revolut soon grew their empires through flexible, digital subscription product offerings.
Sunita Apte, Global Sales Director, Financial Institutions at AXA Partners – which partnered with Monzo back in July to provide comprehensive travel insurance to customers with a Monzo Plus account – noted that neo banks have started challenging traditional high-street banks by amassing a wealth of customers in a short time thanks to their innovative and useful features. “Among these engaged users, there is an appetite for subscription-based services, including insurance,” she said. “When these services are deemed relevant and of value to this audience, they are included within the banking app.”
She went on to explain that the ‘great thing’ about subscription information is that it’s given in ‘transparent language’: “It ranges from terms and conditions to pre-travel certificates, destination information and claims access. Customers can buy on-demand insurance by simply toggling on/off.” And surely nothing could be simpler than swiping to activate your travel insurance? Chalk up one point for the subscription model.
Elsewhere, travel insurance startups have also been quick to exploit the subscription model for the flexible approach that it provides. Launched in 2018, Norwegian travel insurance provider SafetyWing offers its Nomad Insurance tailored to ‘digital nomads’ on a subscription basis. “Most of our customers choose to have their insurance renewed automatically every four weeks, just like a subscription,” explained Sam Claassen, Head of Growth at SafetyWing. “However, if you are a single-trip traveller, you can choose any duration of coverage, whether it be a day or a week.” In this way, the travel insurance offering can be conveniently adjusted to suit a customer’s lifestyle. Tally up another point for the subscription model.
Possibly most importantly, the subscription-based insurance model also drastically reduces the number of rejected claims. Aviva explained: “With applicants only needing to confirm a few key pieces of information, the move cuts the average time taken to get a price for new customers who apply for a home insurance quote online directly from Aviva. Crucially, simplifying the process of providing accurate information reduces the risk of a having a home insurance claim rejected.”
That’s trois points for subscription-based insurance.
“The insurance industry has remained painfully unchanged over decades,” asserted SafetyWing’s Sam Claassen. “Typically, each country has a different set of rules and regulations that must be worked with.” He explained that a lot of SafetyWing’s product development is focused on working through these issues ahead of time so that its customers don’t have to spend hours or days researching and negotiating insurance options for themselves.
Travel insurance startups have also been quick to exploit the subscription model for the flexible approach that it provides
Apte of AXA detailed that their service uses artificial intelligence driven by natural language processing technology to ensure the user understands the coverage provided and the ways in which to use the product. In addition, she adds, parametric insurance allows the provider to offer compensation without the customer having to contact them or submit a claim. “For instance, if a travel insurer knows a tourist is booked on a flight that is cancelled, parametric cover will pay out automatically. Video and internet capabilities also enable access to healthcare professionals via digital consultations,” she explained. “Overall, technology-based services are handing back control of the product to the customer.”
However, it’s not just customers that benefit from subscription services. “Historically, insurers have only communicated with customers at point of claim, and customers tend to have a claim only once every few years. In this model, there is little engagement – and few opportunities to build loyalty,” said Apte. "With subscription-based services, communications can be more frequent. For instance, a travel insurer can send reminders about an upcoming trip, wellbeing tips for the journey, or health advice about the destination.” She remarked that, overall, retention rates are higher in this business model.
“Brand loyalty has changed in the last 10 years,” Apte explained. “Customers shop around and go online to make up their minds. For example, millennials are less heavily influenced by advertising, but read reviews before they buy.”
No doubt, identifying the needs of a customer base is essential to creating a successful product. Sam Claassen remarked that Nomad Insurance is custom-tailored to digital nomads – or people who travel and live abroad full time. “Typically, these people are in their late twenties and early thirties, either working remotely for a company, freelancing or running their own businesses,” he said. “Since this product covers visits home, it’s quite the ideal solution. Oftentimes, these people have standard health insurance back home that doesn’t cover them while travelling.”
If a travel insurer knows a tourist is booked on a flight that is cancelled, parametric cover will pay out automatically
By creating a solution for these specific customers, SafetyWing ensured itself an immediate customer base. And the benefits of meeting customers’ needs extend far beyond this. Claassen explained that by providing an insurance product that users want, the company has been seeing extremely high NPS rating responses and customer reviews. “Better yet,” he said, “we are opening up a two-way communication channel between us and our customers. Through this, we are learning what nomads and global citizens need out of an insurance product. We believe this knowledge will help the entire industry make a shift towards insurance products that people love.”
And this is all part of building brand loyalty. In fact, it is this sense of trust and loyalty that Aviva believes will propel AvivaPlus to success. “We hope it will allow us to establish deeper, longer relationships with our customers built on a transparent trust-based straightforward relationship,” the company told ITIJ.
So what does this all mean for the future of the travel insurance industry? Are we to see subscription travel insurance options popping up left, right and centre? For now, the full effects of the benefits are still slowly feeding down to the industry as a whole. But Apte suggests that the rising number of insurtech propositions will allow insurers to meet customers’ demands for tailored and reasonably priced cover – and perhaps this will ultimately lead to a more accessible and holistic consumer service offering.
However, there are still some misgivings about the subscription insurance model. Stringent data compliance requirements and growing customer privacy regulations are an ongoing challenge for the subscription industry, although AXA’s Apte isn’t so easily discouraged. She explained that AXA consistently signs off all the elements of the digital customer journey to ensure regulatory transparency and compliance. “Any challenge is trumped by the advantages of engaging with an active customer base,” she added.
Sure, the subscription model may require continuous workflow, but with improved customer retention rates and NPS scores, it’s a small price to pay. And for SafetyWing’s Claassen, this new model of insurance helps ensure that consumers have peace of mind when they travel. “The subscription model is essential for allowing people to truly be a part of a network and community that will have their back no matter where they go,” he said. ■