New Travel Insurance Products Mean More Sales Opportunities for Agents

This is the first story in a series on travel insurance.

More travel agents will be able to tap into the nearly $2 billion a year travel insurance market as the industry develops new products to appeal to more clients, according to Mike Meeks, COO of Berkshire Hathaway Travel Insurance.  

And since insurance is an ancillary product that can earn agents substantial commissions—depending on the price of the policy—agents will be a key part of the industry’s expansion.

Meeks made his comments at a recent PhoCusWright conference on travel innovation in Los Angeles, where several travel insurance executives delivered a message that could be summed up as “this isn’t your father’s travel insurance.”

The industry has a long way to go, Meeks conceded, noting that only about 9% of travelers purchase travel insurance.

State regulations governing travel agents’ ability to sell travel insurance, may be a factor in that low percentage along with several other issues: clients’ failure to see the need for travel insurance—especially on simple trips—and a lack of understanding of the products.

(Travel insurance is still highly regulated on the state level, although industry groups like ASTA are working to change that. Agents in many states have to be licensed and registered to sell travel insurance. Watch for the soon-to-come second story in our series.)

Only for flight disruptions
Still, Meeks pointed to the success of his company’s new AirCare product, launched six months ago.

It’s designed exclusively for flight disruptions: For a $25 per-flight fee, payable up to an hour before departure, the traveler gets an immediate payment ranging from $50 for a two-hour delay to up to $1,000 for being trapped on the tarmac for more than two hours (less than the three hours that triggers a federal fine on the airline.)  

Currently AirCare is only available for domestic flights but plans are underway to expand it to international trips early next year.

It’s not as complicated as traditional trip insurance, as there are no forms to fill out, according to Meeks.

Agents earn only a 10% commission, less than they’d normally earn on selling conventional travel insurance policies, which can be as high as 30%.  

Gateway to higher commissions
But Meeks described the product as “the gateway to traditional insurance sales,”  which have a higher commission,” he said.  

Commission rates on these sales vary and are subject to negotiation between the agent and the travel insurer, but since premiums are from 4% to 8% on a big ticket item like a safari or cruise, the payoff can be significant.

Even with AirCare, Meeks predicted agents can make up for the lower price with increased volume.

Repeat buyers purchase an average of four policies per person and if they’re satisfied with the experience  they’d be more open to buying conventional policies as well, he said.

New player
Berkshire Hathaway is also getting into the market for traditional travel insurance.

Last week it rolled out “Exact Care”, offering customers broader coverage for trip cancellation, medical emergencies and the like, but with the electronic claims processing and rapid direct deposit payment based on the same technology engine developed for AirCare.

It’s currently in a beta test with agents and other trade partners and will be offered to the general public beginning in early 2015.

The company is a relatively new player but as its name suggests, it has the backing of Warren Buffett’s Berkshire Hathaway brand and its larger group of insurance companies.

The travel unit’s founder, John Noel, is the former chief and founder of Travel Guard, now AIG Travel.

Broadening its market
AIG Travel, one of the dominant companies in the field, is also aiming to broaden its market in the U.S., said Robert Gallagher, chief marketing officer.  

Gallagher estimated that the unit’s Travel Guard branded insurance is sold through some 8,000 agents in the U.S.

The emphasis now is on delivering service and compensation in a way that’s “better, smoother, and faster,” he said.

However, there are still limits to just how far an insurance seller could aim to become more like, say, an eBay, Gallagher added, citing state regulations governing the sale of travel insurance.

A startup and . . . a ‘disrupter’?
There was at least one startup appearing at the PhoCusWright event who’s threatening to “disrupt” the business, even going so far as to mock, in his presentation, the “boring” travel insurance field.

According to Sharon Haran, CEO of  Passport Card International, some five million travelers face being treated by a doctor abroad every year, and that means they also face waiting an average of 45 days to get paid for their unanticipated medical expenses.

His company is seeking to carve out a niche by paying cash “in real time” directly to the clinic or doctor treating the policy holder.

“We deal with the claims and you get all the benefits,” Haran said.

For agents, that means a commission with each sale, he added.