The Next Generation Of Travel

THE NEXT GENERATION

OF

INSURANCE

Covid-19 has caused a crisis for the tourism industry. Last year, McKinsey reported that it made up 10 per cent of global GDP, sitting almost three times larger than the agriculture sector at nearly $9 trillion. But new data indicates that international tourist arrivals are projected to plunge by 60 to 80 per cent in 2020 and are not expected to jump back to pre-crisis levels next year.

One thing is likely: increasingly cautious tourists and business travellers will be more inclined to purchase travel insurance when they go abroad. Naturally, this is music to the ears of travel insurance providers, but there is skepticism about whether the offerings currently available are innovative enough to meet the new demands of the next generation of travellers.

The cost of falling ill abroad

Travel has long been the “problem child” of the insurance family - offering only a minor revenue stream with high loss and combined ratios, and a long road to breaking even on a customer. And, in bad news for insurance providers, health costs around the world are rising.

According to Willis Towers Watson in the US, the cost of medical care will rise 6.8 per cent globally this year. The most dramatic rises are in the Middle East and Africa, where costs are set to jump by 9.3 per cent, up from 8.5 per cent in 2019. There are several reasons why this is happening - including a greater demand for quality healthcare from more informed consumers, a higher incidence of chronic conditions, ageing and growing populations, the introduction of regional regulations, advancements in medical technology, and an increasing number of non-resident or no-income resident cases that do not pay any of the bills.

As healthcare costs continue to rise year-on-year, out-of-pocket medical expenses become further out of reach for many travellers and expats. This in itself increases the demand for cover that will shift the burden from consumer to the insurance provider. This is because costs for hospital care can be steep and vary drastically by country - treating gastroenteritis in Thailand will set you back around $2,000, but medical attention for pneumonia in Beijing

will cost around $94,500.

Consumers who travel, work, or live internationally without proper cover leave themselves vulnerable to paying these extremely high prices if they get sick or injure themselves while they’re away from home.

Becoming ‘brand of choice’ for millennials

Despite the disruption of the pandemic, we know that people want to see the world, meet people from other cultures, visit historical sites and much more. Research released by Berkshire Hathaway Travel Protection in November suggested the millennials are likely to lead the international travel recovery, with 38 per cent indicating that they plan to travel internationally, whereas the mature demographic (55+) will travel domestically. The intention to buy travel insurance in 2021 was the highest recorded by the survey so far (51 per cent), also led by the millennials.

But millennials - who make up the largest living generation today - and Generation Z have a different purchasing

According to Raul Singh, CEO of Ithaka, a chat-based travel planning platform backed by Thomas Cook, “We will see more travel companies going for the millennial and Generation Z travel segments as it explodes with more younger travellers than ever before.”

mentality to previous generations, opting for products and services that have been personalised to suit their individual needs. Studies have also shown that millennials are more prone to spending money on convenience and experiences rather than spending on material objects, and they tend to show a higher loyalty towards brands they like and connect with.

access this large customer base and inspire loyalty and trust that their needs will be met.

Innovative offerings for returning customers

One of the greatest challenges - and opportunities - for insurance providers as international travel picks back up is pre-empting problematic situations in the ‘new normal’ and responding with useful tools that will minimise disruption to the consumer while also reducing claims costs.

This is something core to our belief system at Air Doctor, where we have been educating travellers and insurance providers about the need to use networks of local private doctors to treat travellers who fall ill abroad, rather than burden overwhelmed emergency care services.

Similarly, the insurance companies likely to pull ahead and offer the best products to nervous consumers are the ones that have addressed the what-if scenarios and provide them with protection and support during their travels. These are likely to include benefits such as offering customers a digital journey should they fall ill, and cash-free solutions for a better customer experience.

As a global rollout of vaccines approaches, travel insurance providers must be proactive in building a new generation of tools - or collaborating with insurance technology startups that have the expertise in-house. As Todd Hancock, CEO of IMG, put it: “Our greatest challenge is being there for customers before they need us – in the market, providing expertise and offering the right products and services at the right price, at

the right time.”

Yuval Zimmerman Director of Marketing at Air Doctor

Source: 1 https://www.mckinsey.com/~/media/McKinsey/Industries/ Travel Transport and Logistics/Our Insights/Reimagining the 9 trillion tourism economy what will it take/Reimagining-the9-trillion-tourism-economy_what-will-it-take-vF.pdf 2 https://www.willistowerswatson.com/en-GB/

Insights/2019/11/2020-global-medical-trends-survey-report 3 https://www.bhtp.com/blog/covid-19-travel-research