How Insurtech is Bridging the Coverage Gap in Vacation Hospitality
Mar 06, 2020
Insurtech, a new segment of the insurance industry, is changing the dynamic in one of the most established industries on the market.
Similar to how fintech is modernizing the financial sector, insurtech solutions are disrupting the insurance industry through the use of big data, analytics and sophisticated software capable of leveraging machine learning to reduce inefficiencies and improve overall customer experience.
The insurtech industry uses technology to create strategic advantages. These technology-led companies have the advantage of being born into the digital age and are far more capable of adopting new technologies and disruptive strategies than traditional insurance companies satisfied with the status quo.
Unicorns such as Lemonade, Next Insurance and Root are examples of companies providing on-demand coverage that adjusts to their customers’ needs. Newcomer InsuraGuest (TSXV:ISGI), another upstart in the insurtech industry, provides additional gap coverage for travel insurance, solving a legitimate pain point that exists in both the vacation rental and hotel sectors. This commitment to customer-friendly practices and industry-wide optimization closely mimics the same principles that encouraged the development of some of the biggest fintech companies on the market today.
Consulting firm McKinsey has compared the rise of insurtech solutions to that of the fintech movement that has come to dominate the market over the last decade. “Insurtechs are extending innovation throughout the sector, creating a competitive threat to incumbents but also potentially valuable opportunities for partnering on the changing terrain,” the firm stated in the report. “Customer expectations of instant digital transactions sustained seamlessly across digital channels are increasingly the norm.”
Insurtech following the fintech disruption model
Many comparisons exist between the insurtech and fintech industries. However, the biggest similarities revolve around the disruptive power of technology. Insurtech companies are targeting every segment of the industry, from Untangler’s focus on using artificial intelligence (AI) to improve customer and employee data to InsuraGuest’s focus on covering the gaps in travel insurance.
According to Grand View Research, the insurtech industry was worth US$1.5 billion in 2018, and experts predicted that it would experience a 43 percent compound annual growth rate. Other analysts project that the industry could be worth as much as US$15.63 billion by 2023. In comparison, fintech investment from venture-capitalist-backed investment firms was US$13.5 billion in 2016 and had quadrupled to US$55.3 billion by 2019.
Insurtech follows the same principles of the fintech movement. After identifying gaps in the market, insurtech companies are leveraging technology to solve problems and capitalize on existing inefficiencies in a variety of adjacent industries. For example, Tractable, another new insurtech company, is working to improve the auto insurance claims process. The company’s platform uses AI to streamline accident and disaster recovery by performing damage assessments, predicting repair costs through the use of photos and expediting the claims process.
Insurtech and the travel industry
According to Technavio, the vacation rental market is expected to be worth as much as US$72.97 billion by 2024, which, on its own, could provide a viable growth opportunity for the insurtech market.
Despite this, a substantial gap exists in the travel insurance market. A large portion of the most popular policies fails to provide adequate protection for the insured. Due to the rise of vacation rental companies like Airbnb, Homeaway, nextTrip, and other non-conventional places to stay, there is a growing trend towards sensible travel insurance solutions designed to handle the nuanced situations that can occur with non-traditional vacation rentals.
InsuraGuest has already partnered with major hotels and vacation rental property management systems like Hostfully to alleviate this problem. “Hostfully is constantly improving its property management platform to help vacation rental owners,” David Jacoby, Hostfully’s president and co-founder, said. “Adding InsuraGuest and its Hospitality Liability policy to our vendors will help managers transfer their current exposure to covered liability by offering these specialized guest protection policies.”
Most of the major providers offer a variety of plans, each with their own terms and stipulations. However, these policies are often unclear to end-users and come in a variety of tiers, leaving the burden of coverage with the traveler. These policies sometimes contain cancellation policies, stipulations for pre-existing conditions and possibly a list of additional exclusions. In addition, these policies often fail to provide adequate coverage for lost or stolen equipment.
Insurtech solutions are taking a different approach to this problem. Instead of selling coverage to consumers directly, they are partnering up with the largest hotels, Hostfully, Airbnb property owners and managers and other companies working in the hospitality industry. Policies are sold directly to the property and they are extended to guests during their stay. In 2019, InsuraGuest partnered with Wisp Resort to provide specialized insurance coverage to its guests.
The InsuraGuest API has been integrated with the property’s property management system Agilysys (NASDAQ:AGYS) to offer the specialized Hospitality Liability policy. “Offering our product to hotels and vacation rentals worldwide aligns with our vision to become the first line of defense for the property and the guest,” InsuraGuest CEO Douglas Anderson said. “InsuraGuest’s insurtech platform makes it fast and easy for our member properties and its guests to have the protection they need at the time they need it, and we’re excited to be a part of the insurtech solution for the hospitality sector.”
These solutions have the potential to decrease liability for property owners, reduce the property owner’s commercial general liability policy by lowering their risk and claim ratio and improve customer satisfaction through automatic coverage. In fact, InsuraGuest’s comprehensive coverage is designed to protect guests in the event of accidental in-room property damage, lost or stolen goods, accidental medical expense or accidental death and dismemberment, providing travelers with peace of mind throughout their stay.
Takeaway
Everything from slow claims processes to ineffective travel insurance plans has culminated in the birth of an industry born with one purpose — to disrupt the unchanging insurance industry. The current gaps in the insurance industry have paved the way for modern insurtech solutions to start the next wave of innovation. With travel insurance, upstarts such as InsuraGuest are looking to provide a better customer experience for all touchpoints. The company continues to find new ways to reduce liability and costs for vacation property owners, hotels and other companies in the hospitality industry while extending additional coverage and savings to consumers.
