ITIC APAC 2023 | The future of travel and health insurance in APAC

Panel

Covering two insurance sectors vital to the APAC region – travel and health – were Dean Long, Ian Allsop, Trudi Hollis and Miksu Vaittinen in the final session of this year’s ITIC APAC conference

The ITIJ team have been reporting from ITIC APAC 2023 in Sydney this week (18–20 June) sharing the discussions that took place at the conference. Read all reports

Dean Long, CEO, The Australian Federation of Travel Agents (AFTA)

To begin the final session Long explained how significant travel is to Australians. “Outbound travel by Australians is Australia’s number one import,” he said. “We spend more money on travel than oil, motor vehicles and electronics.”

In Australia, he said, ‘corporate is well and truly back’ after showing strong recovery signs early on, particularly in domestic markets – leading to a massive increase in domestic airfares.

Another market to recover was visiting friends and relatives (VFR). Throughout the pandemic, people missed out on significant life eventsthat required travel.

However, the price impact in these two markets hasn’t been seen as significant, due to their compulsory nature. But for holidays, the inbound travel to Australia and outbound travel to the rest of the world are yet to recover. Long said that this market is more affected by increasing interest rates.

Pre-pandemic, the spend on travel for Australia consistently sat at six to seven per cent of GDP, with other events not affecting it over the years. Long said: “Discretionary spend on travel by Australians is not discretionary.” However, Covid-19 and border closures led to expenditure dropping to around three per cent, with the level increasing now but not recovering completely.

Long then asked if Covid-19 still having an impact on travel now. In terms of travel insurance, he explained that 70 per cent of all claims are for cancellations due to Covid-19 and not health-related – for example, a passenger tested positive, cancelled flight and then claimed on insurance.

Cruise travellers in Australia continue to be affected though, as the federal government stipulates testing is still required before embarking.

What is affecting Australians is ticket price. In 2019, the average international ticket price was $879. In 2022, it was 54 per cent higher and so far in 2023, it is 58 per cent higher than pre-pandemic. But for the first time, he said, there is a  downward pressure on international air tickets.

However, air capacity is still reduced, with the APAC region being at -38.8 per cent, due to China and its border restrictions. Domestic travel within China though ‘is back’, with capacity sitting at -3.3 per cent.

To conclude, Long noted:

  • Travel is still recovering and will not achieve 2019 levels until 2025
  • Air capacity is driving the significant increase in prices
  • Countries that had limited lockdowns recovered more quickly.

Ian Allsop, Insurance & Partnership Director, ANZ & Pacific, International SOS

Allsop started by presenting the findings from the Risk Outlook 2023 report. Eight out of 10 respondents anticipate travel risks to increase or stay the same. He then highlighted the differences between regions worldwide. The levels in Europe (90 per cent) and Americas (80 per cent) were much higher than those in Asia (71 per cent) and Africa (64 cent), since the European and American markets have been open for two years. Allsop said: “As far as they’re concerned, they’re back to normal.”

International SOS also identified the different types of travellers and their travel intentions. “In Australia, intent from students and faculty to travel has been far outpacing any other market in the region”.

In terms of resuming travel, specifically business travel, it is a case of weighing up travel budgets against travel risks. Allsop reported that 86 per cent of respondents expect their budget to support the health and safety of their travelling employees to stay the same, while 83 per cent expect health and security risks faced by their travellers to increase or stay the same – the highest since asking this question in 2014.

However, a key insight was that the perceived risks are different to those in actuality. Travellers are concerned about security threats; geopolitical threats; and transport concerns but Allsop explained that for every security incident, International SOS has 3.4 medical incidents or health incidents. “Health is more prevalent than what people are conscious about,”.

The current global health risks, therefore, are:

  • Unaddressed and neglected communicable and non-communicable disease
  • Risk-based return to office and return to travel processes
  • Climate change and energy transition
  • Rise of mental health and wellbeing as a business driver
  • Expected increase in health compliance requirements – which is now being legislated for in Australia.

To finish, he looked at the modern hybrid workforce. Focusing on who the duty of care belongs to for remote workers, most respondents said it was on the individual in all situations – office, remote or abroad – to take some responsibility. Allsop explained their attitude to be: “I expect them to look after me when I travel but when I’m in the office it’s all on them [employer], even though I have some responsibility.”

This ability to work remotely or as a digital nomad is ‘reflective of different regions post-Covid’, concluded Allsop.

Trudi Hollis, APAC Head of Product Management and Innovation Travel, Allianz Partners

Shifting focus to trends and behaviours, Hollis started by explaining that Allianz Partners uses its ‘Customer Lab to understand customer behaviour, intent and build personas of travellers of the future to create products’.

The three trends she identified were:

  • Higher travel costs – not just for flights, but also on the ground for accommodation, meals and transfers
  • Higher demand – there was a great rebound in 2022 for some markets in Asia, with 2023 having an even bigger rebound
  • China – huge pent up demand, with a significant number of Chinese travellers back in the region.

Hollis then focused on how travellers’ behaviours are changing and what they are looking for in leisure travel. Firstly, they have concerns about logistics – 52 per cent of global travellers are concerned by transport delay or logistical issues.

Then next focus is loyalty. According to Hollis, loyalty is ‘more important in Asia than anywhere else in the world’. She said: “Our customers want to be part of our businesses and want to know that when they’re loyal that they get that extra edge, that extra service.”

Finally, domestic travel is key in the APAC region, particularly China. Due to the limitations placed in international travel for Chinese travellers, domestic travel ‘has become cool again’ and critical to China’s recovery.

Hollis’ advice for adapting to these changes are to find out what the traveller wants; what the company is able to deliver; and what partners get. Her suggestion is to ‘answer complexity with radical simplicity’ – critically by removing barriers and adopting digital solutions.

One example from Allianz Partners is the use of claims automation. In 2023, 80 per cent of claims were lodged online, with 20 per cent having no human intervention whatsoever. The benefit of this, explained Hollis, is that their staff are able to focus on more complex claims and offer human interaction in those circumstances. The company is also offering digital services such as a hospital finder app and health assistance, including local emergency numbers and medical translations.

She concluded: “The traveller of tomorrow wants something which is seamless. They want barriers removed. They want a frictionless experience and that applies to travel insurance, medical support and other services we provide as part of our policies.”

Miksu Vaittinen, Executive General Manager, Freely

Vaittinen followed on from Hollis by looking at the modern travellers’ approach to travel insurance and how digital innovations can change the more resistant view of travel insurance.

He explained that Freely’s goal is to ‘evolve travel insurance from a begrudging holiday tax to a valued travel companion trusted by millions globally’. However, there are challenges that the company must overcome to achieve this.

Firstly, modern travellers are sceptical about insurance. Vaittinen explained: “They do not have the trust because there have been too many bad claims experiences.”

The next issue is travellers are usually more focused on travel, rather than insurance or what is included in the policy. “People don’t really care about travel insurance, they just want to know they’re covered,” he said.

Travel insurance in general hasn’t evolved products and services to align with user needs, which Vaittinen said is the third challenge, with long-standing businesses needing a lot of organisational change being the fourth. He said though that ‘legacy systems are not a problem’, as they can be solved by engineers, but the issue comes in trying to change the mindset of a 1,500 person company to be customer centric.

His main solutions were therefore to become customer-focused but ‘not just for your end user but also internally’, and to leverage technology, even if it means starting small: “Don’t worry about being perfect, worry about making process,” he reassured.

The opportunities that then arise from changing the outlook are clear. Vaittinen suggested that companies should create insurance products that people can understand. “It is your job to make that complexity simple, not your customers’ job to understand your complexities,” he said. Additionally, pain points should be removed for customers. And finally, taking the opportunity to automate the mundane, he said, will make ‘people available for complex claims or human interaction’.

He concluded the session with these takeaways:

  • Do know your users in order to solve the right problems – don’t just make things pretty
  • Do leverage digital services to increase efficiencies – don’t forget to optimise the human experience
  • Do personalise user experience – don’t just focus on the product.