Covid-19 has had a significant impact on the way we all travel, and the associated risks when doing so. Consumer pre-pandemic knowledge on travel insurance cannot be relied upon going forward, and firms are expected to take into consideration the changing landscape for sales and marketing of their products.
But with change comes opportunity, so what has the industry been doing to increase the perception of value in travel insurance post-pandemic?
Pre-pandemic, consumer behaviour indicated a limited understanding of what the product covered. With a loss of trust in the travel industry post-pandemic and the cost-of-living crisis tightening its grip, will this lead to travel insurance falling by the wayside when people go away?
Total coverage not a guarantee
People feel let down. At a time when consumers were ready to take to the skies, they were met by a grossly underprepared industry. But when it comes to understanding the primary purpose of travel insurance – when things do go wrong, many travellers automatically assume total coverage – when in actuality, what they have purchased is a medical expenses product. The other elements surround obligations and responsibilities such as flight refunds, which legally the airline should be footing. For such a multifaceted product, there is multifaceted confusion, often meaning the true purpose of insurance goes unrecognised by the consumer until it is too late.
Malcom Tarling from ABI confirms that the main purpose of travel insurance is overseas medical expenses, and that is ‘what it is really designed and priced to cover’. “We’ve had alarming case studies for some of the typical medical bills our members have been paying out over the past 12 months – and it’s horrifying.
There are three main messages around travel insurance right now:
• Its value, in terms of medical expenses
• Covid – what you’re actually covered for
• The compensation process for those caught up in travel disruption.
“The fact is that people shouldn’t think travel insurance is an alternative for your legal rights to claim compensation and refunds from tour operators and airline providers.”
For such a multifaceted product there is multifaceted confusion, often meaning the true purpose of insurance goes unrecognised by the consumer until it is too late
With people isolated at home for so long, their wanderlust comes with a type of ‘revenge travel’, where risks are more likely to be taken abroad – so insurance becomes imperative.
Sean Tipton from ABTA agrees: “Consumers are going to maybe risk hiring a moped, or jump on the back of a quad bike, which could be foolish and dangerous. It is human nature that after a period of confinement, people will want to try different things – but they may automatically assume they are insured, which is not always the case. A message we put across is if you see something you’re not automatically insured for, then why is that? It’s probably because it’s dangerous, or risky at the very least. So, should you be doing it? We try not to be all doom and gloom, as we want people to enjoy their holiday. But at the same time, we want to make sure they do so safely, while not bankrupting themselves with a massive bill.”
It seems the need for insurance couldn’t be greater, so how do we get that message across?
To sell peace of mind and protection, clear language is a focus for insurance companies, ensuring the general public understands what they are covered for, or where the obligations lie in terms of legal rights, guaranteeing that they are not misled.
The Financial Conduct Authority (FCA) states that, ‘Firms must make sure that their communications with customers are clear, fair and not misleading, and should not use terminology that customers might not understand.’
According to Tarling: “I think insurers are committed to plain English – that should be a given. Another important factor is that consumers don’t just buy on price, as it’s a very competitive market out there, despite everything that's happened in the past 18 months to two years. Travel insurance could be very cheap – and you’re getting the right policy at a very good price. But equally, you must get the right policy for your needs. It’s a false economy to go for the cheapest, then find that you’re unexpectedly not covered when you need it most. It’s vital that we keep hammering home that message of buying on suitability, not just price.”
Quality, as well as cost
Tarling urges consumers to understand what they are covered for now. “If you’re booking travel or a holiday, something you look forward to, insurance is probably bought with a heavy heart. Hopefully, you recognise its importance, but it’s one of those products you hope you never have to use – yet it’s particularly important for those with pre-existing medical conditions. Make sure you’ve got the right policy for your needs and understand what you’re covered for. Maybe use a specialist provider or broker. The last thing anyone wants is bad publicity for an insurer. It’s poor PR for the industry for someone to end up in hospital overseas, only to find that they may don’t have the cover they expected. I mean, it’s a rarity, but does happen – it’s not something that the industry wants to see.”
What is evident is that consumer education and understanding are essential
The current travel situation leads us to consider which products and services are increasing in terms of consumer perception and value – and whether travel insurance is one of them?
Miriam Boote, Client and Business Development at brand firm Designate, believes so: “I don't think travel insurance as a product ever had so much prevalence. At Designate, we have a lot of travel clients. We know the pre-pandemic planning cycles when people would look for travel insurance, if not already included or packaged, versus now. It’s actually right at the point of planning holidays, as opposed to just a 20-day window. There’s a golden opportunity at the moment in terms of people actually investigating more about the product itself, the quality, and what it covers. Of course the price is going to be higher, because of additional cover for people’s needs, but we must increase understanding of what they’re buying as much as possible – there’s so much confusion. Really clear, connected human messaging is the ideal marketing approach.
“I would argue that now is the time to really capture consumer attention, getting them to engage with products and services. I think there’s always going to be people that will take risks. And I guess, from an underwriting point of view, perhaps those risk-takers aren’t necessarily the ones you want to attract anyway. You want considered, high-value consumers, who will commit to the initial policy, then hopefully stay on with some degree of loyalty.
“Obviously, those that really want to understand their products make sure they’ve perhaps got additional cover above affiliate or bank account travel insurance. There are opportunities for brands who get the right message, product, price and policy in this period to meet consumer needs.”
A position of privilege
Seeing the market progress and interaction between company and consumer, Boote continued: “Again, it’s attracting the right customer, but making sure people are prepared to pay a price when they’re used to buying a policy for £9.99 on the site. It’s just positioning your brand in the perfect place to make the most of that for future-proofing. And now is the time to be out there.
Really clear, connected human messaging is the ideal marketing approach
“It’s not just all about products. We’re helping people travel the world again, which is hugely emotive. Being that kind of gateway to friends or family being together, from an emotional connectivity and human point of view, is a privilege. While not a legal requirement to have travel insurance, enabling people to do that once more is pretty powerful from a brand and creative point of view.”
In summary, consumers must not think that travel insurance is an alternative for any legal right to claim compensation and refunds from tour operators and airline providers. Legal rights are clear about what you’re entitled to when there’s disruption.
What is evident is that consumer education and understanding are essential. And although there is clearly opportunity for the industry to re-engage with the consumer, until product understanding is solid, the opportunity to leverage interaction will not be fully maximised.
With companies such as Allianz producing a handbook to allow travel advisors to understand what they are selling – and the current trend of Britons being more risk-averse and purchasing higher cover policies – it is an issue which continues to be addressed by the travel industry.
If nothing else, Covid has highlighted blind spots for both insurance companies and consumers.