Embedded insurance has become a hot topic in the insurance industry, thanks to the vast benefits it offers to consumers, insurers and third-parties. It has particular significance to the travel, leisure and events sectors, an industry known for its complex and varied risks - and low consumer travel insurance purchase rates. In fact, latest figures suggest that only around 23% of travel customers buy travel insurance to protect their bookings.
This is despite the fact that we are all aware of the host of significant risks that could affect a trip or even cause it to be canceled. Whether through inclement weather, the many effects of COVID-19, financial insecurity, flight delay or cancellation, lost luggage, bad sea conditions when on a cruise, closed attractions and more, the list of traditional and evolving risks goes on. This translates into lost bookings, cancellations or delays which leads to an ultimately poor experience for both customers and travel operators alike.
The problem is, the traditional insurance industry isn’t currently designed to handle such a wide variety of risks. The typical "one size fits all" policies they offer are too rigid to allow adequate cover for more specific concerns. Luckily, embedded insurance is ready to fill the gap. An offering which is integrated into the buying process - using all the information that is available on the product purchased, (whether that’s the vacation package, flight, leisure tickets, etc.) provides personalized, relevant, real-time insurance policies that benefit the whole value chain - customers, distributors and insurers. Here are three ways it's proving to be transformational for the travel industry:
Personalized protection for every individual trip
Whatever the trip is: a day out to an amusement park, buying a seasonal ski pass, taking the family away for an RV adventure or a two-week luxury cruise, each of these cases has a set of individual associated risks. Embedded insurance, when done correctly, is uniquely flexible in that a package can be built in real-time while the consumer is building their perfect trip, with the cover options changing or updating as new experiences are added to the itinerary.
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As they reach checkout, consumers will find a tailored package of insurance products ready to go, perfectly suited to their trip, giving them the reassurance that should something happen, they have cover they can rely on.
Cost savings for travelers
Travel insurance can be prohibitively expensive. Analysis found that the average price of an annual travel insurance policy rose by 50% between 2019 and 2020, leading to potentially hundreds added onto pre-pandemic premiums. Embedded insurance helps tackle the costs, as policies are offered at point-of-sale using data already entered by the customer meaning they receive a highly relevant offering and enjoy a streamlined purchasing experience, added-value points which are likely to increase conversion rates.
Travel companies of all sizes can benefit
One of the most attractive features of embedded insurance is that it has a flexible, scalable business model. This means that travel companies of all sizes - from startups or niche operators with a thousand bookings a year, to large multinational companies handling 20 or 30 million bookings - can offer insurance to their customers. Embedded insurtechs ensure that the technical and compliance side is taken care of, so when a policy is purchased, the premium is distributed between the insurer, reinsurer (who protects the company against large losses) and the travel company who gets commission from the sale. Everyone profits while customers get the peace of mind they’re looking for.
Following an extremely turbulent few years for the travel industry, people are ready to get back out there and experience the world once more. It’s clear that embedded insurance has the potential to hugely benefit the travel industry as it builds back stronger than ever before. Customers benefit from a streamlined purchasing experience and tailored policies which offer true peace of mind, while distributors see the benefits of higher conversion rates, fewer lost bookings and additional income channels.