Guest post from Noam Shapira, Co-Founder & Co-CEO, Setoo
“The best-laid plans of mice and men often go awry,” has to be one of the most relevant quotes for our times. The cost of disrupted travel plans for travelers around the world as a result of COVID-19 merely serves to highlight the central role that travel protection is going to play in the future. And that’s why insurance is going to play a key role in the regeneration of the travel industry.
COVID-19 has changed how we live, work, interact and socialize. We need to consider how travel can recover and what the future of travel will look like. I believe insurance will play a key role as we rebuild travel and build it back better.
It’s time to address the challenges of COVID-19 travel
As I’m sure we have all experienced at some point, every planned journey – whether for business or for pleasure – has the potential for disruption. A flight delay that leads to a missed connection, resulting in the cancellation of an important meeting. Weather that is unsuitable for the activities that we planned. As we look towards travel in the future, protection against disruption has to be addressed. The solution, in my opinion, lies in insurance.
Today’s consumers demand a pleasurable and easy user experience, personalized to their specific needs This has become a de facto requirement in every consumer service, regardless of industry. Additionally, consumers are seeking touchless solutions to minimize interactions that require complete digitalization. This is where I believe that digitalized insurance has an important role to play in the future of travel, as it enables the creation and provision of personalized protection that offers travelers confidence and comfort without financial risk and fear of losing their money. Furthermore, it enables the provision of multiple types of fully digital products, many of which can include parametric insurance.
What is parametric insurance? It is defined in Insurance Journal’s article entitled “Parametric Insurance Fills Gaps Where Traditional Insurance Falls Short” as “…a means to guarantee direct payout after a qualifying event and protect against unpredictable but potentially devastating risks in ways traditional insurance packages cannot.” Parametric (index-based) insurance is going to be a key driver in the future. It’s a great example of how technological innovation, data proliferation and the ability to tap into external databases enable insurance companies to create new types of fully automated, no-claim products that can be tailored to a range of short- and long-term needs. Fueled by the demand for customized disaster insurance, it’s an ideal solution for customer travel protection of the future. Consider, for example, the idea of a rain-free protection package for a summer vacation in Greece; coverage can include cancellation because of a weather forecast for rain.
In “Why Parametric Insurance Is Radically Reshaping the Insurance Industry“, my colleague Udi Makov notes that parametric insurance is an opportunity for a paradigm shift in commercial insurance products. That’s because it enables insuring against a wide range of risks, exposures, and threats. It’s not an indemnification product; it’s coverage where a benefit payable is determined prior to policy purchase, by estimating the loss as accurately as possible. (Subject to certain conditions being satisfied).
The main differences between parametric insurance and traditional indemnity insurance policies can be summarized as follows:
- Compensation payment trigger: Payment is automatically triggered by an event exceeding a predefined parametric threshold, rather than after a long process to determine actual loss or damage.
- Payment structure: Payment can be structured according to varying, predefined conditions, i.e., we’ll pay “x” if this occurs, and “y” if that occurs, replacing reimbursement based on the actual loss suffered.
- Customer appeal: Complex policy conditions, deductibles, and exclusions that often are a deterrent to consumers are replaced by a simple and intuitive scheme, correlating the chosen index with the payout and loss sustained, significantly enhancing customer satisfaction.
E-businesses can deliver the protection consumers demand
Leveraging the most innovative technologies – from big data, AI, machine learning and blockchain to IoT, telematics, connected insurance and cloud – enables e-businesses to offer a variety of new, automated, parametric-based insurance products. And since these products can be tailored to consumer needs, they will not only provide optimal protection; they will also delight customers with a great user experience.
Control over the products being offered by people who understand what consumers want delivers important benefits:
- Increased revenue from ancillary services, because consumers will want to buy these new types of insurance and protection products.
- Enhanced brand loyalty, because consumers will recognize e-business support when something bad happens in their customer journey.
- Competitive advantage through the delivery of an outstanding customer journey experience.
This process automation opens the way to a range of opportunities, from dynamic pricing per individual consumer risk to automated underwriting, policy management, and automatic delivery of compensation. Furthermore, as the industry moves forward, new business models will demand new types of insurance products to meet new risks and maintain alignment with consumer expectations.
Insurance will play a key role as we rebuild travel
With people more connected than ever before, they are demanding personalized protection against both financial and personal risks. Such protection requires 24/7 online access to reliable and accurate data and information, from flight delays, airport closures and risk/danger levels at any location around the world to more mundane issues such as lost baggage, bad weather and car rental hiccups.
This level of protection can only be provided through personal insurance solutions; and parametric insurance products which allow the provision of more insurance products that were not available in the past. It’s the basis of the partnership between Amadeus and Setoo, which enables travel agents to provide personalized and innovative insurance products that tap into their consumers’ concerns. Using Setoo’s protection-as-a-service platform, they are empowered to offer travelers a secure customer journey through a wide choice of insurance options that cater to varied trips and needs.
Travel is changing. People want protection. With today’s technological advancements, insurance can evolve to become a completely personalized service in terms of price, risk and communication, thereby meeting the needs and expectations of consumers in specific situations. It’s going to be a gamechanger.
About the Author
Noam Shapira is an entrepreneur and veteran of Israeli high-tech, constantly looking for disruptive solutions that enable traditional industries to adapt to the digital world. As co-founder and co-CEO of Setoo, he’s seeking to totally transform the way insurance works. He’s addressing the demands of millennials for a delightful customer experience and enabling e-businesses to quickly define and launch simple, transparent insurance and protection products which deliver new revenue opportunities.