What a month of high adrenaline activity this has been – not for me personally, as my world is sadly bereft of adrenaline and more likely to suit a course of Valium.
I am, of course, referring to Felix Baumgartner, the supersonic skydiver who tumbled from space last week, ironically just as the space shuttle, Endeavour, was being towed into retirement at 2mph along the streets of L.A.
Another Red Bull event this month involved the human equivalent of a flying squirrel leaping from a 1400m mountain over the Great Wall of China, racing to the ground in 23 seconds and flying underneath a cable car to add a bit of thrill to the proceedings.
My point is that with such feats hitting the news, we should not be surprised that some travellers around the world are now looking to achieve more and more from their holidays; posting photos of their latest stunts on Facebook and Pinterest, encouraging their friends to then go higher, faster or just plain scarier. Even the elderly traveller is no longer satisfied with Marbella coffee mornings and is branching out with camel treks in Mongolia and hiking in Patagonia.
From a travel insurance point of view, this poses a few challenges that may need to be both recognised and managed. Despite ABTA advising of this growing trend, there remain few insurance companies that are actively collecting data on what their customers are intending to do on their travels or what activities they are involved in. In a world where ‘data is the new oil’, it seems a missed opportunity for insurers not to even collect claims data on sports and travel activity.
With a more adventurous traveller, and technology allowing country-specific underwriting, the travel insurance industry could maybe revolutionise their rating factors. With online and offline sales processes allowing country destinations to be captured for single trip travel, insurer rating is now already becoming more country-specific, primarily based on medical costs.
However, many rating changes are in reaction to losses incurred in the past and it would be interesting to use travel trends to rate the propensity for potential travel claims more proactively, from stag/hen destinations (e.g. Krakow/Prague) to adrenaline sport/farm work activity (e.g. New Zealand) to cruises (e.g. Norway) to conservation (e.g. Rwanda, Borneo), and even destinations where booze-fuelled accidents are more likely in summer (e.g. Spanish and Greek Islands). The key is to use existing data more effectively without adding to the sales process e.g. we could factor seasonality and even age if we could show material impact on performance.
Quite how we anticipate the next ‘big’ thing and how ‘big’ it will actually be is always the problem. Travel insurance is not a high margin line of insurance and volume remains critical to success. If we increase the work involved in assessment of lower volume risks, does this make the rating and analysis less cost-effective and offset any underwriting benefits? Do we accept that such granular understanding of travel insurance will reap long-term benefits if we are patient? In essence, how much data analysis can we effectively deal with that adds value to the ultimate goal long-term profitability?
To be continued…
Written by Greg Lawson, Head of Retail at Columbus Direct
