Post Europe: The challenges of pan-European insurance programme

The European Single Market is one of the crowning achievements of the European Union project. Harmonisation of goods and services across EU borders has revolutionised the way we work, travel and buy.

However, harmonisation for all is not borne out in practice, and, signing European deals can bring challenges as well as rewards. The airline industry is similar to the motor trade or car insurance, in that intense price competition has squeezed margins on its core product offerings, and companies instead drive profit and growth through ancillaries. Travel insurance is, therefore, one area of growth and many airlines are looking to embrace this area across the EU.

Ancillary contributions
One of the larger insurers publishes a figure of £72 as the average sale value of ancillaries on every policy holder. In many cases, due to margin pressure on core product, the contribution from ancillary products can be significantly greater than the core product sale.

Ryanair is the largest low-cost airline in Europe carrying around 80 million passengers each year. Annual ticket sales are growing, and growth is strongest in Europe. In 2010 Ryanair was one airline that decided a single carrier across all territories should be put in place to provide travel insurance across 22 European territories, choosing UK General Insurance as its partner.

"Harmonisation for all is not borne out in practice."

Distribution channels
Insurance products in this sector are often sold both as part of the ticket sale process and on a standalone branded white label websites with links from the home site and various points along the customer journey.

EU regulation allows passporting into other European countries, but it is critical that local regulation and local tax requirements are complied with and properly administered. And not all European countries are covered by passporting; Switzerland is just one country that requires companies to be specifically authorised.

Accurate translations
All supporting documentation must be available in the language of the insured. On one level, this is reasonably straightforward, but the translations must achieve the intended meaning that the underwriter had in mind rather than a literal translation. Poor translation damages the product's credibility and exposes the insurer to paying out on unintended claims.

Travel insurance requires both a 24-hour emergency service to deal with medical and repatriation emergencies and also a claims processing unit. Both services must be provided in spoken and written format across all European languages.

"Switzerland is just one country that requires companies to be specifically authorised."

Tailor-made
Usually, travel insurance is a standardised product, but airlines are increasingly challenging insurers to tailor products to fit the requirements of individual traveller groups, reflecting regional, demographic and cultural profiles. Travel insurance in Europe is quite different to a UK or Irish product where indemnities are typically much higher and more emphasis is placed upon medical insurance.

It is important that the product is localised so it meets the expectation of a purchaser for that class of insurance in their country. If the product is not ‘localised,' conversion will suffer. This applies even if the benefits provided are substantially higher than would normally be seen. In many European countries much more emphasis is placed upon the cancellation risk and quite often the product is rated by reference to the cancellation cover provided.

Regional profiles
The product must also recognise the changes to travel profile by region, for example in certain countries, such as Italy, the majority of travel takes place within the country, therefore, many of the benefits associated with international travel -specifically medical related - are not required.

Expertise in market pricing for each region is, of course, critical. Price is driven by a number of factors, such as taxation, market development or consumer sophistication. Change is constant, and it is vital to move pricing (and coverage) to reflect the market.

"If the product is not ‘localised,' conversion will suffer."

European fundamentals
It is no easy task for a UK based insurer to operate across the whole of Europe. The fundamentals are to research each region carefully There are many European countries but essentially there are four regions to research; UK and Ireland, Southern Europe, Eastern Europe and Northern Europe.

Inevitably partners need to be engaged to assist with servicing in different countries and it is important to choose high quality partners as a bad decision will take some time to surface and even longer to correct.

Overall, working as a European business is very positive; it is exciting to develop new territories, new products and ways of working. UK Insurers can bring a new perspective to European business and, while the barriers to entry are high, once you really understand the markets, business can be lucrative.

John Bibby is the director of schemes sales at UK General Insurance