For thousands of British holidaymakers looking forward to their first overseas trip in two years, Easter 2022 has been a crushing disappointment.
With more than 1,300 scheduled routes canceled over the four-day bank holiday weekend, airlines and airports struggled to cope with staff shortages as demand fell from 50 to around 75% of levels before the pandemic.
Travelers who had been notified in advance of changes to their travel plans could count themselves lucky; others were unexpectedly stranded for hours, staring at blank departure boards, spending their vacation money in overpriced airport lounges and wondering if it was worth all the effort. They were probably also wondering when and if they would get their money back.
The chaos has been a reputational disaster for an industry still in a fragile recovery from COVID-19, which now also has to deal with soaring fuel prices, recruitment issues, sporadic lockdowns in Asia and to the disruption caused by the war in Ukraine. This has led some forecasters to postpone until the second quarter of 2025 the date when they now expect air traffic to return to pre-pandemic levels (Bain & Co). Travel insurers have similarly had to deal with a roller coaster over the past two years.
First, they were hit by an avalanche of claims triggered by a global traffic ban, putting analog processes under extreme pressure. This was quickly followed by a shift in public opinion around travel insurance, with many concluding that the comprehensive policies they had regularly taken out in the past and barely reviewed, did not stand up to scrutiny in this new unpredictable travel environment. And, perhaps most importantly, the insurance industry as a whole had to find ways to work with distributors to inspire public confidence to travel again – or they were all in the soup. Airlines in particular, who viewed insurance cross-selling simply as a revenue generator, began to see it as a way to add value to their product and literally bring nervous customers back on board. It is in this maelstrom that Koala, a B2B insurtech startup based in Paris, has put its parametric paw.
Launched in 2018 by Ugo Weyl, Léo Tordjman and Antony Mechin, the Koala team was preparing to release its first product in 2020 – an option allowing customers to be automatically compensated in the event of delay, cancellation or diversion of their flight can be grouped via an API in the booking process of a travel agency. True to Koala’s vision of providing travel protection “with no exclusions, no evidence, and compensating travelers as soon as a disruption occurs”, it removed multiple layers of complexity to deliver the ultimate user experience, which also reduces claims management costs. Its protection against flight interruptions and missed connections is based on parametric technology.
“When someone buys a product, we follow live the flights associated with it. We know at all times if that specific customer will get the flight. If they arrive at the airport and have missed the connection, they’ll already have a new ticket in their email,” says Weyl.
Koala is part of a new generation of insurtechs that cannot be clearly categorized. Registered in France as a brokerage firm, its revenue stream is twofold: it takes a commission as a broker/general management agent on each insurance policy sold, but, at its core, Koala is a design firm of financial solutions, combining multiple data streams and building machine learning algorithms to create bespoke paperless products in an automated business process. It makes its “technology expertise” available to others and licenses its products and software, working with companies from top to bottom and across the insurance and travel industries. Its early design and delivery partners included insurance distributor Wakam (formerly known as La Parisienne Assurances), which now markets a leading flight disruption product, and Koala’s reinsurer Swiss Re, for whom he helped create a dynamic pricing algorithm that uses machine learning to predict the cost of any canceled or missed flight worldwide. But in the spring of 2020, no one was going anywhere and Koala had to think fast on her little feet. “We were lucky because we were small when COVID-19 hit. It was easier for us to adapt,” Weyl recalls.
And what he created was a non-insurance protection product called Flex. Sold to businesses from airlines to hotels, ferry companies to campsites, it gives travelers the peace of mind that they can cancel their trip with just one click, without any justification or reason, and instantly get a predefined lump sum on their account. . Probably more accurately described as a guarantee or a change of mind guarantee, depending on how it’s marketed, Flex isn’t subject to the restrictions that apply in some regions around who can sell travel insurance and how.
Importantly, in 2020 it has given airlines, which had been forced to deliver value – by destroying flexible fares with no cancellation or change fees to encourage passengers to rebook, an exit strategy when the market began to recover. Flex turned out to be the sweetener that would open doors for Koala. “When we were selling it, we had partners saying, ‘I’d like to distribute it, but I also need more traditional coverage and I’d rather not have two or three vendors, so can you get it for me? ‘,” says Weyl.
In this sense, Koala now also operates as an aggregator, able to offer its products alongside more traditional comprehensive medical and repatriation coverage for any traveler anywhere in the world. It overcomes the problem tour operators often have of finding multiple licensed insurers in different territories to provide coverage for every traveler, regardless of where they need to be repatriated.
in case of emergency. In February, French travel search engine Kayak launched a digitized travel protection platform, powered by Koala technology, offering Flex alongside its comprehensive insurance, with Kayak’s own research finding that around half of French adults planned to take out travel insurance this year. However, a quarter of respondents did not trust insurers; about 40% said policies were unclear and misleading; and just under a third planned to get bogged down in any subsequent claims process.
This was followed by a report by Global end-to-end travel experiences and travel medical company Collinson in April which showed that while 39% of UK travelers surveyed were no longer worried about traveling abroad due to changing COVID-19 guidelines, 38% were and 48% worried about losing money due to COVID-related cancellations.
While AXA XL’s senior vice president of global travel recently predicted “very strong growth in travel insurance sales” with travelers tending to “overconsume travel insurance and assistance products” as they sought reassurance from operators, John – Lee Saez, Director of Kayak Europe clearly saw in Koala ‘a great opportunity to build a new kind of no frills protection’. Kiwi.com, an online travel agency, has gone further by incorporating Koala products into a comprehensive guarantee that accompanies any reservation and gives customers the flexibility to change their travel arrangements. It is this bundling of digital financial services that can be offered alongside more structured and complex insurance products, which Weyl believes will differentiate operators in the long term and, in the short term, help the recovery of the sector.
“Built-in insurance has been a feature of the travel industry for some time – when you buy a trip you are offered insurance or you pay with a credit card and the insurance comes with it. But bundling These other types of financial services have several advantages. When you sell insurance, 5-25% of people will buy your product. When you start aggregating, you go to 100%. Everyone is covered and that lowers the price. protection per person This is where the travel industry is heading, if operators realize that there is great value for the end consumer and that it works.
Despite pent-up travel demand, 2022 is not shaping up to be a great year for the industry, with staff shortages expected to lead to further operating difficulties and soaring costs that could inflate prices.
Axa’s senior vice president of global travel, Erick Morazin, recently revealed that the company has moved from a “price negotiation approach to a real mutual understanding of risk and defining a common strategy”. , as it helps travel operators, including major airlines, recover from the attrition of the past two years. Part of this strategy is to recognize what the customer really wants – the insurer has signed an agreement with Etihad, for example, to offer passengers optional personalized products based on the traveler’s profile. Partnerships with intrepid tech explorers like Koala are likely to become more common as the industry adapts.
And, if you’re sitting on your suitcase in Terminal 4 at Heathrow right now, that must be good news.
This article originally appeared in The Insurtech Magazine #07, Page 29-30