How One Startup Is Reinventing Travel Insurance For The Post-Pandemic World

Admittedly, it might seem like a strange time to be launching an innovative travel insurance product given how much the tourism industry has contracted in the wake of the global pandemic.

But CEO Ugo Weyl of travel insurance platform Koala told Karen Webster recently that now is the perfect time to disrupt what is regarded by consumers as a hideously friction-filled experience.

In fact, Weyl said, in an environment where everything tourism-related seems up in the air (no pun intended), travel insurance is one of the few points of consistency out there. Unfortunately, Weyl added that it’s often consistently frustrating — and largely a terrible experience for consumers who try to collect in the event of a canceled trip.

Weyl said Koala aims to make travel insurance a new journey toward reliability as tourism attempts to get on the road to recovery. He said that’s the only way to provide enough reassurance to get potential travelers on planes again.

“What we’re really aiming for is the ‘wow effect’ for consumers,” he said. “The experience right now with travel insurance is pretty much the opposite of the wow effect because it’s mostly dreadful, and then you never get your money back. What we really want to do is build something that is the opposite side of that.”

After all, travel insurance that customers can only count on to make them miserable after an already miserable travel experience isn’t reassuring and doesn’t make consumers feel confident about booking a trip in today’s uncertain times. Given the incredible uncertainty facing airlines in particular, consumers have a great need to feel protected enough to book travel far in advance, Weyl said.

Carriers need consumers to start booking three months in advance again, but customers aren’t going to if they don’t know whether there will be another wave of the virus or new lockdowns in a place they want to travel to.

“So what we did [is] build a product that makes all the bookings of our partners fully flexible, meaning people who opt in can decide to cancel their trip for no reason without having to bring any justification if they move to cancel before 24 hours prior to departure,” Weyl said. “If they do, they get a 100 percent refund transferred back to them.”

That’s just one of many possible policy types that Koala can build for its airline partners, which sell the coverage as an add-on to a ticket, or bundle it into the ticket price itself.

Building A Policy With Travel Providers In Mind

As a B2B2C firm, Koala builds insurance products for consumer users but delivers them though airlines and travel agencies. Their secret sauce is monitoring the travel journey in real time, so that if there is an event that would trigger insurance coverage, the consumer is automatically paid for that claim — literally without even filing one.

The available policies can vary. For example, the first product Koala built is a flight-delay or cancellation product. That reimburses customers in full if airlines cancel flights, delay them by more than three hours or consumers cancel trips themselves more than 24 hours in advance.

Koala also offers a variation that covers consumers against missed connections. The company monitors whether a traveler is at risk of missing a connecting flight and automatically books the person on the next available flight to their final destination so as to avoid major interruptions.

“Mostly what we do is build tailor-made insurance products based on what those clients tell us they need,” Weyl said. “We then find underwriters for those policies, [which] we sell through the travel players.”

Other variations the company has offered include reimbursing customers more and more money as a flight delay drags on. For instance, a 45-minute delay could mean a $45 reimbursement, while a 10-hour delay would qualify the consumer for a $600 payout.

Koala is also working on specific insurance products for the unusual circumstances that travelers face in the pandemic era. For example, policies could protect those barred from boarding a flight because they fail a temperature screening.

“We are building a product [that is] actually going to pay for a hotel for that passenger to quarantine so they can stay for free for 14 days,” Weyl said. “That will also reimburse them for the missed trip.”

However, he said such policies are very difficult to create because there’s very little hard information to calculate the risk levels (and thus pricing) on the coverage. But Weyl said Koala is working with underwriters willing to take “innovative risks” in terms of assumptions, as well as adjust pricing as actual results flow in over the next several months.

The Ultimate Goal: Automatically Bundle Insurance In With Tickets

Koala builds its products to be add-ons to the ticket sale process that consumers can easily elect to buy. Customers can even provide their card or banking information so that if a payout occurs, Koala automatically and instantly transfers it. Weyl added that with some digital banks, the process is even simpler and only requires consumers to offer their phone numbers to qualify for reimbursement payments that are pushed instantly in the event of a viable claim.

Weyl said that might not make sense for all seats, as economy travelers are notoriously sensitive to even small airline price increases. But he said that “for a $2,000 business-class ticket, a traveler can add a few dollars or euros to the cost (that their employer likely pays) without any real effect [and] offer a really great customer experience where there is not a complicated claims process. [If] something breaks, you get it fixed and then you are quickly compensated.”

But ultimately, he said he sees the best distribution model as one where the insurance is built into a trip’s baseline cost. Instead of offering insurance, airlines could simply build reliable, flexible trip insurance into their ticker prices. He said he hopes that since Koala’s product eliminates the traveler’s right to file any other claim as covered by EU regulations, that airlines will be encouraged to make it a part of their ticket price, as a value add to their travelers.

Weyl said that’s a simple-sounding idea, but one that represents a sea change to how travel insurance is offered today. However, he said it’s a change that’s desperately needed right now as travelers are looking for assurance — and insurance — that they can actually rely on.