How Embedded Insurance is Transforming the Travel Industry

Meitav Harpaz is the CEO and co-founder of Palo Alto headquartered insurtech startup Pattern

 

The travel industry is no stranger to innovation, with new technologies constantly reshaping the way we book, plan, and experience our trips. One of the most exciting and transformative trends to emerge in recent years is the concept of embedded insurance. Embedded insurance is the integration of insurance policies into existing products or services, and it is revolutionizing the travel industry in a number of ways.

Introducing embedded

Embedded insurance isn’t a new concept in the insurance world, but it’s been revolutionary for travel. Up until recently travel insurance hasn’t been able to provide adequate insurance cover for the varied and complex risks that exist in the market. 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.

Rather than installing the technology themselves, many travel agents and businesses in the leisure sector prefer to collaborate with an external platform provider. By partnering with an insurtech that serves as a Managing General Agent (MGA), the travel business can outsource all insurance underwriting, risk analysis, pricing, and exposure management activities.

Giving convenience to travelers

One of the biggest benefits of embedded insurance for travelers is the added convenience and peace of mind it provides. Instead of having to research and purchase separate travel insurance policies, travelers can now take advantage of insurance that is seamlessly integrated into their travel bookings. Many airlines now offer travel insurance options at checkout, which can cover everything from trip cancellation to emergency medical expenses.

This kind of embedded insurance also offers significant cost savings for travelers. By purchasing insurance directly from their travel provider, travelers can often get better rates than they would by purchasing a separate policy from a third-party insurer. This is because travel providers can negotiate bulk rates with insurers, and then pass the savings on to their customers.

Supporting travel providers

But it’s not just travelers who benefit from embedded insurance. Travel providers themselves can also reap a number of advantages. By offering insurance as part of their travel packages, they can increase their revenue streams and create new revenue streams that didn’t previously exist. This is particularly important for airlines, which are operating in an industry with notoriously slim margins. By offering insurance at checkout, they can increase their overall revenue without having to raise ticket prices or charge additional fees.

For travel agents who seek to embrace technology and gain the commercial benefits of offering travel insurance products to their customers, embedded insurance is the optimal solution. 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.

Streamlining the claims process

Embedded insurance also has the potential to streamline the claims process and improve the customer experience. In the past, filing a travel insurance claim could be a time-consuming and frustrating process. But, by integrating insurance policies directly into travel bookings, insurers can more easily access relevant information and process claims more quickly. This means that travelers are more likely to receive prompt and efficient assistance when they need it most.

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. 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.

Added security

Perhaps most importantly, embedded insurance has the potential to make travel safer and more secure. By providing coverage for unexpected events like trip cancellations, lost luggage, and medical emergencies, embedded insurance can give travelers the confidence to explore new destinations and try new things. This is especially important in today’s uncertain world as we recover from the Covid 19 pandemic.

As embedded insurance continues to gain traction in the travel industry, we can expect to see more innovative applications and new partnerships between travel providers and insurers. From cruise lines to vacation rental platforms, there are countless opportunities for embedded insurance to transform the travel industry.

 

About the author

Meitav Harpaz is the CEO and co-founder of Palo Alto headquartered insurtech startup Pattern, which is reinventing personalized insurance for travel business. Before founding Pattern, Meitav was the founder and CEO of multiple startups in the financial industry, including Eccella Corporation (sold to NGDATA), which provided data engineering solutions and data strategy planning to large corporations in Financial Services.

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