(All guest blogs represent the views of the individual and do not necessarily represent the views of the ABI or its membership.)
I am looking forward to discussing the role of insurance in the changing world of travel at the ABI Travel Insurance Conference on Tuesday. In my sector of the travel industry, last minute travel is still in growth, and this is mirroring the growth in cancelled holidays.
Last year travel insurance pay outs hit the highest levels since the record year of 2010, when the Icelandic ash cloud hit.
The £17 million rise was largely driven by the 11% increase in cancellation claims, taking the total value of claims due to trip cancellations up to £145 million.
Medical expenses still make up the majority of claims, with trip cancellations ranking second - accounting for 34% of claims, but this growth must be causing the industry a significant headache.
So far no-one has thought that any of these cancelled holidays could be sold on.
Until now.
Potentially any profits from re-sale could be used to keep premiums down.
It’s true that a large proportion of the increase in cancellations in 2017 were due to airline disruption and bad weather at home and abroad, making it all but impossible to make contingency arrangements. But the ABI also reported that at least some of the growth was due to financial reasons.
The average family holiday cost in 2017 rose by more than £500.
Our own consumer research found that 42% of travellers have cancelled a holiday at some point in their life for reasons as varied as illness, family emergencies, relationship break-ups; work commitments and financial difficulties. Not all of these reasons are going to be covered by all policies.
Insurance companies tell us that they invest a great deal of time and money on customer service to ensure customer loyalty and retention. But they know that turning away claims endangers that. Even though 87% of travel claims are paid; 13% of customers are not and these consumers are potentially very unhappy that their fore-thought, planning and money was seemingly misplaced.
Our suggestion is that insurance companies could partner with us to improve service and retention. Giving customers a valid alternative course of action when bad news is meted out is clearly a much better proposition than a ‘computer says no’ response.
My discussions with the insurance sector initially focused on solutions to help consumers left out of pocket, but I have been surprised when some companies came back to me wanting to know whether there was potential for reselling travel where claims had been approved. Although the sector doesn’t lose out on these claims, and neither do direct suppliers, local businesses such as restaurants and attractions do miss out on revenue when a family is not there to eat their food or enjoy their museums for instance.
There is clearly potential for generating a new revenue stream, funds from which can be redirected either into CSR activities or lowering premiums.
We are still examining the logistics, but there is no doubt of the value in ‘distressed stock’ in an ever increasing ‘lastminute’ world.
I look forward to progressing discussions further!
Hear more from Simon at the ABI Travel Insurance Conference 2018: Choosing the right travel companion - travel insurance in a changing world on Tuesday 09 October. Book your place now.