Travel insurance and the technological revolution

As the travel insurance industry verges on the eve of a technological revolution, Vanessa Rombaut investigates the budding technology behind digital distribution, customer-centric programmes, back-office efficiency and analysis of big data

A recent report from global management consulting firm Bain & Company found that 79 per cent of consumers worldwide intend to use digital channels for insurance interactions. But with 52.7 per cent of consumers accessing the Internet via mobile phones, it’s no longer enough to simply have a website. More than ever before, insurance companies are offering websites with responsive design and with the ability to purchase insurance using online payments. But technology doesn’t stop at distribution. Customer loyalty can also be fostered using apps and social media.

What is undeniable is that the digital revolution is paving the way for major change

Indeed, PricewaterhouseCooper’s Health Research Institute (HRI) recently reported that use of health apps in the US has doubled in the past two years, from 16 per cent to 32 per cent. Many insurers have introduced wellness apps to monitor the health of clients, foster customer loyalty, and slash big-dollar claims. E-claims are on the rise, too, with the potential to curb fraud and increase efficiency. The new influx of data collation, meanwhile, has given rise to the concept of ‘big data’, where insurers are now investigating the possibility of being able to predict the likelihood of claims, and adjust premiums based on detailed client analysis. What is undeniable is that the digital revolution is paving the way for major change.

Digital distribution

The biggest digital growth in the past ten years is in the area of comparison websites. “In the last three to five years there has been a huge growth in comparison sites – they’ve taken 30 per cent of the UK market,” says David Corney, managing director of UK software development business Firemelon. Accessible technology and the Internet has allowed for smaller players to take large chunks out of the traditional markets. “More established insurance companies are much slower to react to market conditions,” says Corney, adding that off-the-shelf software is a ‘cost-effective solution for independent insurance companies but also big companies’. Travel insurance is often a small ticket item for larger insurers, so the IT framework has to be cost effective. As a result, many larger insurers are turning to off-the-shelf software to stay competitive, as their in-house systems tend to date quickly.

However, in order to stay at the top of the technology game, insurers need to focus on location-based services, push notifications, responsive design websites and convenient mobile phone payments. According to recent statistics released by eMarketer, by 2018 61.2 per cent of the global population will be accessing the Internet via their mobile phones, as opposed to 49.3 per cent via desktop computers. Many insurers are seeing this shift, and are responding to the increasing consumer demand by providing mobile-friendly services. Fabrice Benard, chief marketing officer of AXA Gulf, told ITIJ: “AXA Gulf were one of the first companies in the Gulf to launch a website in 2008, and that makes us ahead of the competition. We’re now investing in digital technology, the Internet, mobile apps and tablets.”

It is this flexibility and the willingness to adapt products in response to customer feedback that is at the very heart of customer-centricity

Convenient payment systems are a crucial part of the equation, and the future for online payments is cardless. For instance, the most popular form of online payment in China is a third-party payment platform called Alipay, which has 400 million active users, amounting to 50 per cent of the online payment system, and 80 per cent of all mobile payments. In addition, Apple has released its own virtual wallet called Apple Pay, which is available on the iPhone 6 and the Apple Watch. These payment systems offer an ease and security that card-based systems didn’t offer before. This increase in security can only serve to bolster consumer confidence in e-commerce.

Customer-centricity

One way that insurers are keeping in touch with customers is through maximising their online presence, and using social media channels. “We have a Twitter account to try to answer each and every question from customers. This can be complaints but also information about products,” said AXA Gulf’s Benard. MAPFRE in Spain, is also heavily investing in this area. It told ITIJ: “[Social networks] open up more direct and flexible, two-way communication channels with clients, enabling us to adapt our products to the needs of policyholders and attract new clients.” It is this flexibility and the willingness to adapt products in response to customer feedback that is at the very heart of customer-centricity.

With some insurers reporting 70 to 90 per cent inaccuracy rates in claims paperwork for general insurance, it isn’t hard to see that digitisation can reduce the claim turnaround time

With a recent report from Capgemini finding that UK millennials are willing to give up personal information for lower insurance premiums and that a quarter are willing to use wearables like the Apple Watch to do so, savvy players in the industry are using technology beyond direct sales. As mentioned, US insurers have begun introducing wellness apps to enhance customer loyalty and proactively prevent big-dollar claims. Aetna International has been using its wellness app with great success. “Our goal is to maximise healthy days, rather than sick days,” David Healy, general manager at Aetna International told ITIJ. “Our apps monitor diet and fitness to help with this. We have the iTriage app which helps members look up medical conditions.” Aetna’s wellness app also has the ability to find a doctor or dentist, view claims and coverage and enrol in an online health coaching programme.

Smooth operators

As the claims process becomes more digitised, back-office operations are increasingly efficient. “In the last two years, we’re seeing apps where no original invoices need to be sent for claims processing,” says Dave De Loose, from Global Medical Partners in Belgium. “There are features where you can take a picture of the invoice and send it in.” Claim forms can now be filled out electronically to ensure accuracy, and this leads to speedy turnaround times. Healy told ITIJ: “The most important thing for electronic claims is speed. There is more accuracy, people complete them clearly, and all information is obtained. A lot of the time, delay comes from lack of information.” With some insurers reporting 70 to 90 per cent inaccuracy rates in claims paperwork for general insurance, it isn’t hard to see that digitisation can reduce the claim turnaround time.

This translates into happy customers, as Muir Robertson, managing director of CEGA Group told ITIJ: “Travel insurance claimants don’t want to fill in lengthy forms, to pack up and post evidence, or to wait weeks for all this to be processed. Nor do they want to make multiple phone calls to check on a claim’s progress or to see delays in having a bank balance restored – even after a claim has been approved. They certainly don’t want to have to repeat information twice. Technology is playing a significant part in transforming their claims journey.”

The speed in which the claim is notified and the evidence is received now allows for a single claims-handler to process the claim. This has an obvious impact on back-office efficiency and customer satisfaction. The customer can be in touch with their single, informed handler who can help them from beginning to end. Customers are noticing the difference, said Robertson: “In the last twelve months, we’ve seen our customer claim lifecycles decrease, compliments double and fraud detection rates rise, thanks to fast-track claims initiatives.” Claims can also be paid in record time via programmes such as PingIt, which sends payment within one hour of approval.

E-claims software often has in-built triggers to warn claims handlers of a possible fraud, as Corney explains: “For example, if you get someone trying to claim a thousand pounds and it’s the last day of their holiday, the flag will pop up and say investigate this as possible fraud. There are indicators in there, and as we progress more scenarios will pop up, we can start doing calculations between questions.” The software is becoming so sophisticated that it can pick up duplicate copies of receipts to further detect fraud.

Convenient payment systems are a crucial part of the equation, and the future for online payments is cardless

On top of this, the speed at which new insurance rates can be set is now unprecedented. “Overnight, we can programme in the new rate and that’s what the client sees the next day,” said Ole Ærthøj, managing director of safeAway A/S in Denmark. This speed and flexibility allows insurers to stay sharply competitive. Nick Gibbons, business development manager at Nordic Insurance Software which has provided systems to both safeAway A/S and CEGA, adds: “Automation is key, not just to improve efficiency, but more importantly for compliance. In such a heavily regulated industry, automation ensures that tasks are being completed consistently by all staff, including new staff, because the business rules are incorporated into the workflows. And automation provides the underlying data for reports and documentation about how a task was performed and by whom.” Such systems are also potentially easier to update – an important aspect when adhering to changing regulations, said Gibbons: “Insurers with modern core systems have an advantage in regulatory automation over their peers working within the confines of a legacy environment. Plus, a modern system, based on business rules or workflows rather than hard-coded instructions, is much easier to update when new regulations are introduced and existing regulations are modified.”

Playing it big

In order to keep the edge, insurers are looking further afield to big data, which offers tantalizing possibilities to slash premiums and bring in larger revenues. They are collecting data and looking at ways to use their findings for customer segmentation, risk calculation and fraud detection. “We can make predictions based on this data – so if we have a young married couple living in Belgium, they will need a different cover from someone who is in engineering and oil exploration, which will need a high evacuation cover. We can base it on the job you’re doing and the part of the world you’re in,” Healy told ITIJ. When the technology is harnessed to its full potential, the result can be targeted insurance policies, tailored to the consumer, increased consumer trust and loyalty, lower big-dollar claims and higher revenues. Nigel Walsh from Capgemini added: “Insurers now have the ability to use real-time data streams to draw a complete and contextual picture of each customer’s behaviour. This information can be used to provide a more tailored service, making quotes more representative of the individual and related product offers more relevant.” 

But the sheer amount of data collated means that it will take time before in-depth analysis can be made, and this translates to new specialist roles within the industry to tackle the new technological challenges. However, big data could have unintended consequences. A concern addressed in a recently released white paper from Suncorp Group Australia is that automated underwriting could axe entry-level insurance jobs, which are classic stepping stones to higher functions within the industry. “Previously, new recruits to the industry would be introduced to risk assessment and pricing in these basic lines. However, as a result of automation, entry-level underwriters are now forced to cut their teeth on more complex risks in other lines before they’ve had the chance to develop,” writes Darren O’Connell, Suncorp’s executive general manager. “This threatens to develop into a serious skills gap as the older generation of underwriters transitions into retirement.” However, underwriters are under no threat of extinction, he said, as the industry will always need people ‘with the experience and expertise to properly determine risk appetites, manage the performance of portfolios and create new products’. John Price, lead ombudsman for general insurance with the Australian Financial Ombudsman, agreed with this sentiment, telling ITIJ: “Human touch is a very important part of the underwriting process.”

Where will it go from here?

The possibilities that technology can offer seem to be endless. The future is set to bring virtual assistants who could help the insured make medical appointments and rearrange travel itineraries. Big data can link databases and alert travellers about flight delays or travel warnings. Video medical consultations are set to rise, as they are not only convenient but are cost-effective. However, compared to other industries such as retail, media and banking, the travel insurance industry is lagging behind in e-commerce. With half of insurers found to have no realistic plan for digitisation, the question is, will the industry be able to keep up with consumer demands as technology explodes exponentially?