Sasha Gainullin has worked in the travel assistance and travel insurance sector in one form or another since the late 1990s, with roles at companies like Travel Guard, AIG and Tangiers International. It’s fair to say he’s a seasoned professional, and has, over the course of his career, seen plenty of things that the industry is doing right, as well as what it’s doing wrong.
Talking about how the industry has changed, he starts by pointing out that for a long time, the travel insurance sector hasn’t actually changed. What has transformed, though, is the way that people book their travels. Travellers go straight to the airlines, they use AirBnB and other independent routes. However, the evolution of travel insurance products has not kept pace with these changes. “What has kept pace,” he pointed out, “is innovation in the medical assistance sector. It’s gone from a simple ‘find a doctor near to you’ service, to the widespread adoption of telemedicine services that connect patients with the right doctors wherever they are.”
How we travel has changed, but the products were stagnant, and change was necessary. Enter battleface. “When travel insurance was first developed, it was created as a one-size-fits-all model that was right at the time. It is limited by its very nature, and it became more so as exclusions were added, distribution channel models changed, and profit margins became tighter.” So, with smaller risk pools and downward pressure on premiums, the industry started to come to a standstill, and a fresh approach was required to tackle the new risks that travellers and international workers were taking.
A particular segment of globally mobile workers had a unique problem. When TV journalists started to be employed as freelancers instead of full-time employees, they needed to sort out their own travel insurance. But try getting travel and medical insurance to fly to Yemen, or Syria, or another war-torn nation, to cover the fast-moving and potentially very dangerous situation there. Most travel insurers weren’t interested.
But the battleface team knew that these people could get travel insurance, if it was done right. You just need to find the right underwriter. And it wasn’t as difficult as you might think. “Actually, it wasn’t hard,” he told ITIJ. “Underwriters are interested in these risks. They know that travel insurance can be profitable and innovative, but they don’t know how to fix the problem of certain methods of distribution taking massive portions of the premium as profit.” battleface has worked with Lloyd’s of London underwriters to take a modular approach to travel insurance, with destination, age and number of days of travel key to pricing the risk and the premium.
Working with affinity partners
Distribution models and affinity deals is a topic to which we keep returning, almost by accident. “We’d love to work with airlines and travel agencies,” said Gainullin, “but as a startup, we can’t afford to.” Commission for some airlines can be as much as 60 per cent of the premium, and when you add in a couple of intermediaries between the airline and the insurer, then margins start to look paper thin. And then comes the knock-on problem – is the insurance now so pared down and full of exclusions to try and price it correctly that it won’t actually offer the cover the end consumer wants/needs/expects?
There are good price comparison websites and the like out there, who are customer centric and who are not demanding too much of the revenue
Gainullin tells the story of an airline coming to him to ask for his help, as their customers were having nine out of 10 claims denied by the insurer. “But when we look at this model for selling travel insurance,” he said, “what else can an insurer do to protect their bottom line?”
What the industry needs, he continues, is an airline or other travel provider that puts the customer first. “This is where the API tech platform can come in,” said Gainullin. “The travel insurance product is made during the flight booking process, with all the customer’s information accurately taken.” With the right information from the traveller, the risk can be rated accurately and priced accordingly. Perhaps this might also go some way to changing customer perception of travel insurance – when they can actually see the price of their insurance as part of the cost of their holiday, and can perceive the value of the insurance product more clearly. “There are good price comparison websites and the like out there, who are customer centric and who are not demanding too much of the revenue,” Gainullin counters, but are they too few and far between?
Could regulatory interference be the answer? In Australia, financial regulators are moving to cap the amount a distribution channel can claim to 20 per cent of the premium. And there’s a chance that airlines are not going to be allowed to sell travel insurance at the point of sale. Instead, they will have to wait five days before contacting their customer with their offer of insurance, so that the customer has a chance to evaluate their options for cover and choose the one that meets their needs, rather than the one that is most convenient because it is bundled in with their tickets. Whether or not these moves are introduced, and if they are, whether or not they are successful in their aims, remains to be seen.
Covid exposure presents opportunities for learning
The problem of insurance products not offering sufficient cover as they are priced down to compete in a difficult market was, said Gainullin, totally exposed during the Covid-19 pandemic. Insurers are finding it more and more difficult to offer the right benefits to customers with downward pressure on premiums and tighter margins.
One good thing that has come out of this debacle, though, is a heightened awareness on the part of consumers about the benefits and exclusions of travel insurance policies. “We are being asked the right questions by customers,” he said. “They want to know what is and, more importantly, what isn’t, covered.” battleface actually start their conversations with customers by listing what they don’t cover. And while consumers might be concerned about exclusions, what they are appreciating, Gainullin points out, is honesty. “We are up front about what we cover. Consumers understand that insurers can’t cover everything. And as long as we are honest about it and manage expectations, the customer isn’t put off by exclusions.”
Consumer education is another topic to which we return more than once. The UK’s Financial Conduct Authority is making insurers and intermediaries improve their efforts to educate consumers about the products they are buying, and Covid has presented the industry with the perfect opportunity to boost understanding of travel insurance. “Misconceptions are all too common,” said Gainullin. “The industry has to educate the consumer better, but it goes both ways – the consumer has to make an effort to understand what they are purchasing.”
Other opportunities he identified that have occurred as a result of the pandemic included collaborative working practices, with better signposting to fellow insurers that can offer cover where another can’t. “We have got better at recognising our specialities and sticking to them,” he told ITIJ. The industry has shown that it can adapt to challenges in the market – 9/11, the Asian tsunami, and an unspellable Icelandic volcanic incident are all examples of where upheaval in the travel market has resulted in insurance product innovation. And Covid is no different, Gainullin believes. “As an insurer, we have a responsibility to react to changing markets and create relevant products.”
It was refreshing to talk to Gainullin about what the industry can do, identifying where the opportunities lie for improvement and innovation. Fortune favours the brave, goes the saying. And it’s fair to say that companies that can think outside the traditional travel insurance box can benefit customers and industry alike; designing products that fit the needs of a new generation of travellers, and being transparent about the cover on offer. Covid doesn’t have to be the death of the travel insurance sector. It can be the chance it needs to reinvent itself as the industry that prices its risks properly and gives consumers the right cover, for a fair premium. Simple, right?