How can travel insurers use more data to improve their products?

For insurers, data is fundamental to assessing risk, determining premiums, and processing claims. For travel insurers this data includes customers’ medical and financial information. And, data on geographical or political risks, and travel and transport.

However, newer technology offers opportunities for travel insurers to collect data in new ways. For instance, the advanced data analytics provided by artificial intelligence (AI), smart devices, and real-time databases can benefit customers and insurers alike.

Read on to find out more about how travel insurers could access more data to improve their products and customer experience.

What data do travel insurers currently collect?

Like all insurers, travel insurers use a range of data to assess risk, set prices, and manage claims. This data comes in two forms: personal data about the customer and third-party contextual data.

Typically, customers will provide their own personal information when they get a quote or make a claim. This includes:

• Medical conditions and medical history
• Travel plans, such as where they’re going, what they’re doing, and how long they’re staying
• Financial information, such as how much cash they’re carrying or how much coverage they want

This is all data specific to individual customers, which informs their level of risk. Insurers also look at third-party contextual data, such as:

• Flight information from sources like the Airport Operational Database
• Data about political or geographical risks, such as volcanic activity or epidemics, from government sources
• Historic information about claims in the destination, such as the value, frequency, or location of claims

Together, this information creates a picture of the potential risk of a claim.

But could insurers be better using data to improve the overall customer experience?

Could parametric policies be the future of travel insurance?

An interesting example of using data to improve the claims experience lies in parametric insurance policies.

A parametric policy is where a customer insures themselves against a specific event. It’s called parametric because that event has to meet certain parameters. So, if an event that meets a given threshold happens, the insurer pays out automatically. For instance, the insurer pays out if a flight is delayed by an hour or more or luggage is lost.

This automated process is only possible with trackable, quantifiable information, such as details about flight delays. Insurers offering parametric policies usually have direct integrations with flight databases such as FlightRadar. So that they can access this information in real-time.

The benefit of parametric policies is that customers can be confident they’ll be protected if something goes wrong on their travels. As a result, the claims process becomes much faster and more convenient than in standard policies.

Parametric policies are far from the norm. But using real time data and leveraging AI could make it easier to implement into all policies. Here’s how:

Real-time data could help insurers provide a more proactive service

Real-time data from third-party sources is already used in insurance. But, real-time data from the policyholder is rarely accessed. Consumers hold a lot of data that could influence claims on their smartphones. Could we make better use of it?

For example, insurers could offer a product that allows travellers to alert their insurers immediately if they have a medical issue. Customers could simply click a button on their insurance app, and the insurer could access their exact location in real-time. Making it easy to provide useful information.

This could include directions to a hospital that takes their insurance, or doesn’t require an excess to be paid to the hospital directly.

Alternatively, by using customers' real-time location data again, insurers could send messages to long-term travellers, such as digital nomads, as they cross a border. The message could include basic information on any relevant risks in the area or any travel disruption.

This way, insurers can deepen their relationships with their customers. By sending customers to appropriate healthcare providers, they can also control the claims process. This helps both customers and them.

But, to do this, insurers will need customers’ permission to use live data. But, it’s not certain that they’d agree to data sharing.

According to the ABI, 86% of consumers say they’re concerned about organisations selling or sharing information about them without permission. 53% are still uncomfortable even when they do give permission. 

To address this concern, insurers must ensure a real benefit for their customers. For example, lower premiums for sharing real-time data.

AI could help normalise parametrics and improve customers’ access to product information

As we mentioned, parametrics would significantly speed up the claims process for both insurers and consumers.

This hasn’t been a mainstream approach. But with the recent advancements of AI, it could be easier for insurers to use real-time data to offer parametric features.

For example, imagine a consumer is on holiday and a wildfire has hit. Government advice would be to recommended they leave. But, there is widespread disruption and flight delays. The insurer knows that the customer is in this location as they booked their policy.

Using AI and real-time data such as open banking, they could automatically begin to process these claims costs immediately. As of now, travel insurers do a great job of helping with climate challenges like these. But AI and real-time data could help to make it faster less resource-intensive.

Another way AI can help is in simplifying information for policyholders. Many consumers are currently uncertain about what exactly their travel policies cover. A Post Office study found that only 52% of people knew what their travel insurance covered them for. 

Customers could ask questions to chatbots in conversational language, 'am I covered for this?' or 'how much is my excess?' without having to check their documents.

Chatbots can also be helpful for customers looking to buy travel insurance. Customers can interact with the chatbot to offer more data and find a policy that suits their circumstances.

This technology is already available for insurers to integrate into their processes. Of course, this would need some initial investment, but the benefits would be considerable.

What would be the benefits of using real-time data and AI?

Using real-time data and AI could offer two major benefits for both insurers and policyholders: 

Parametric features could be easier to implement. Reducing the resources needed for claims processing

Claims have always been a resource-intensive process for insurers. They involve a large team of claims handlers, who must speak to customers, collect documents, and validate the information they provide.

Parametrics policies don’t need this level of labour. Instead, the claims process is fully automated. As soon as there is evidence of a disruption via real-time data from external sources, the claims process is triggered. Then, customers get paid.

Of course, parametric policies are currently limited to a few specific scenarios, such as flight delays. But by accessing more real-time data through the customer, such as their location. And using AI, insurers could apply parametric features. In this case, AI could be used to analyse data far quicker than human claim handlers can. This would enable insurers to make the most of real-time data.

This has obvious benefits for both customers and insurers. Customers simply receive payment into their accounts, without completing a claims form or requesting money. Meanwhile, insurers can reduce the resources required, saving them money in the long term.

AI could help a customer find the right policy for their needs

Parametric policies would use AI best in the claims process. But, it could also have a role to play earlier.

For example, customers used to have to pick from a set of policy options on Confused.com. But AI chatbots could help tailor products to customer needs. A customer could request a given amount of medical coverage but lower baggage cover. The chatbot can then find a policy that suits.

Also, during a chat with a chatbot, for example, customers may ask about specific products. The chatbot can easily collect this information and feed it back to both price comparison websites and insurers.

It could be a win-win situation for customers, insurers, and price comparison websites.

Additional data gives travel insurers the chance to improve their offering further

By collecting more data, including real-time data collection and AI, insurers could significantly improve the claims process and customer experience. Of course, will take time for both insurers and price comparison websites to test, and make the most of this new technology.

But in the next few years, we might see travel insurance become easier to sign up for and manage.

To stay up-to-date on the latest insurance trends, stick with Confused.com.