An expansive network of partnerships

Insurers often reach customers through affinity partnerships, which are business-to-business (B2B) and business-to-consumer (B2C) models, and feature a lot in travel insurance – where it is travel agents or airlines selling the insurance to the customer, explained David Parry, Head of Finaccord (an Aon company). “The affinity partnership world became interested as the platform economy developed, where alongside the likes of Uber and Airbnb, there are hundreds of smaller players,” he said. “It is something that was expanding and moving very fast. Some companies were acting as insurance partners, while others had not got anything in place, so there was a big opportunity in trying to explore what was out there and what could be happening.”

According to Peter Smith, Vice President of Travel Partnerships at Cover Genius, when customers are buying travel protection, they look for products that are relevant to them, priced right, and delivered in a convenient way. “The best place to reach customers is by embedding the option into the product they are purchasing. We make that convenient for them, of course, by embedding insurance or protection within the purchase path,” he said. “Offering products through airlines works really well. We have realised that travel insurance is one of the top ancillary revenue drivers for them, above offering other products like car rental and hotels.”

Consumers tend to purchase flights first when making travel plans, and are more willing to look after their purchase, said Smith. “They want to be protected if they fall ill before that flight, or if they miss it, and do not want to be without medical protection in a foreign country. As such, we find that where people are purchasing their flights are the best distribution channels for travel protection,” he affirmed. “A major misconception for many travellers is that their credit cards offer them insurance, but this is typically a very basic product, for very basic needs. When customers make a claim, they often discover that they are not adequately covered in all scenarios – and we saw this, especially during the Covid-19 pandemic. Our Embedded Travel Insurance Report found that 45 per cent of travellers would prefer to buy protection from embedded sources ‒ namely their travel provider, agent or airline ‒ rather than traditional insurance sources such as credit cards,” Smith concluded.

The best place to reach customers is by embedding the option into the product they are purchasing. We make that convenient for them, of course, by embedding insurance or protection within the purchase
path

An opportunity exists to bridge the gap for hotels where embedded travel protection still appears to be undiscovered – especially for cancellation insurance, according to Smith. “Where one has a non-refundable hotel, for example, hotels could offer cancellation protection that would likely convert well. Customers would feel protected for their travel needs and the hotels would be equally covered,” he said.

Regional and cultural differences

There are cultural nuances to how customers behave and how people travel, explained Smith. “As an example, in the UK, the EHIC (previously the E111) card allows one to get medical coverage across the EU, and this affects where people prefer to travel and if they purchase protection,” he said. “Some countries also have good local transportation so people tend to vacation in-country, meaning they would have the same medical protection they would in their own city. However, there are still some products, such as cancellation cover, that would be important because there is not that level of protection for those travelling in-country.”

In France and Germany, online penetration is still relatively low, which means people are visiting travel agencies in person, observed Smith. “As such, offering travel protection there needs to be done through the travel agency and remain a top priority for the agent. In different countries with different cultures, one has the ability to offer a variety of products to new subsets of customers. They need to be provided in innovative ways because of the distribution channel as well,” he said.

The platform economy has the potential to change the face of affinity partnerships, because so many people are involved – and in a slick, smooth technological way, according to Parry. “Several legacy insurers have been very active, and some specialist players are setting up partnerships for smaller platforms [or] smaller affinity relationships. These might not be an insurer, but a specialist broker who will find an insurer to work the relationship out,” he said.

“Often, the key is reacting fast and then talking to a platform, understanding their needs and designing a policy for them – while getting someone who understands the technological side of integration, which also brings a bunch of players in. Across Europe, there are fewer numbers on platforms in Spain compared to Italy, France, Germany and the UK. France and the UK have the biggest percentage of platforms that already have some sort of insurance relationship. This is not a surprise, because they are innovative markets,” Parry concluded.

Understanding the customer base

According to Metiav Harpaz, CEO and Co-Founder of Pattern Insurance, one-size-fits-all insurance is not a practical solution. “Instead, the flexible, highly adaptable nature of embedded insurance means the end-user receives insurance that works for them. Today’s consumers expect quick, clear and hassle-free digital experiences, where they can get what they need in one place,” he explained. “Embedded insurance helps meet these expectations by using the data the consumer has already entered earlier in the buying journey to provide personalised, relevant insurance cover in real-time at the point of purchase – a completely streamlined experience for the modern consumer. We work with our customers using their business knowledge to co-create cover tailored specifically for their clients.”

It is important for insurers to offer tailored products relevant to a customer’s needs – and data is integral to this process

Indeed, there is so much to learn and understand about customers when they are providing details upon booking, which can then help meet their potential needs, according to Smith. “Through data, one can make assumptions about the reasons for travel, who the customers are travelling with, how long they are travelling, and then evaluate what their protection needs might be. It is important for insurers to offer tailored products relevant to a customer’s needs – and data is integral to this process,” he said.

Big data is valuable so that when one does not have all the facts, the data allows one to make assumptions, affirmed Smith. “Analysing and understanding data in real-time and through artificial intelligence can help to develop relevant products at the right price. For example, if a traveller has checked baggage, one can assume that the traveller might want baggage protection,” he said. “Or if a traveller has booked a first class, long-haul flight between €5,000–10,000, one can assume that the cancellation needs and values are very different to somebody that has booked a €50 flight for a weekend away. When the value changes, the needs change, and big data helps to understand the convenience customers really want and protect them in a way they need.”

Studies conducted by affinity partnerships on consumer behaviour revealed a clear move to digital channels, stated Parry. “Covid-19 hit companies like Uber and Airbnb in 2020 because lockdowns meant fewer people travelled or stayed away from their homes.

People may look for cheaper holidays, and this implies a benefit for a partnership that can make a better offer

However, a survey commissioned by Finaccord of more than 12,500 people across 10 countries, into the impact of Covid on consumer behaviours related to insurance, found a big switch to buying and servicing policies online.

“Working patterns have also become more flexible, with a growth in working from home, a spike in freelance and gig economy employment, plus more use of apps to buy goods and services,” Parry said. “As to what is happening now, we are having a big squeeze, where people may look for cheaper holidays, and this implies a benefit for a partnership that can make a better offer.”

Looking to the future

Smith believes that the travel and airline industries are tied to legacy technology that has been built over many years. “They have talked about innovation and offering more convenience to their customers to make travel easier, but the reality is that it’s very costly to change. The Covid-19 pandemic helped the industry realise customers needed protection and peace of mind more than ever. We know that during the pandemic, traditional insurers went missing and travellers were left with policies that did not protect them when they needed it most,” he said. “Our Embedded Travel Insurance Report found that, globally, 20 per cent of customers who purchased travel insurance for pandemic-related reasons were not covered when they made a claim. As such, we have seen demand for more relevant embedded protection products rise significantly as we emerge from the pandemic.”

We have seen demand for more relevant embedded protection products rise significantly

Indeed, the key learnings have been in the delivery and protection offered, specifically the relevancy and timing when embedding non-mandatory insurance coverages, affirmed Joyce Segall, Head of Underwriting at Pattern Insurance. “The insurers must do their homework to understand the needs of the distributor and their end-customer. It is a massive challenge for the insurer to provide an experience and offering that meets the distributors’ standard for customer experience,” she said. “No two travellers are the same, and an experienced, tech-savvy embedded partner will enable personalisation at the level today’s consumers expect. Embedding uses available data and artificial intelligence to create tailored coverage. Protections that best meet the consumer concerns around their booking.”

The pandemic also gave the industry the downtime to think more strategically – leading to innovation and new ways of providing customers what they were looking for, said Smith. “The industry realised it needed to provide relevant products that adequately cover customer needs, at the right price, and in a convenient solution. There is not just one magic ingredient – it is all about having very transparent products,” he concluded.