Case Study: “Gifted babies” – mitigating for travel insurance risk in Iceland
When it comes to travel insurance, Iceland in particular tells an interesting story as people come to make “gifted babies”. The Northern Lights in Iceland attracts tourists from all over the world, especially those from Asian countries such Japan, China, and Taiwan, who carry the belief of conceiving “gifted” babies under the famed aurora borealis. However, the increase in these travelers led to an increase in claims loss. We explore our approach to mitigating this risk and overall reducing the claims loss value.
The above graph is a depiction of 6 months of European claims data (sample size of 20,000). The bubble size reflects the claims loss value, and as you can see, the largest bubble is Iceland – it first grows, then shrinks.
This initial increase in claims loss was due to an influx of tourists, particularly from these Asian countries. These travellers usually rent cars and then have to drive them in Icelandic winter conditions which they are unaccustomed to. The conditions can be hazardous; with Arctic winds resulting in clouds of gravel and ash affecting visibility, car doors being blown off , and other motor accidents involving drivers from countries where they drive on the left-side of the road! Overall, it’s a perfect storm for an insurance nightmare and the reason why claims loss in Iceland grew so substantially relative to other nations in the EU.
Upon noticing this trend, we were able to reduce this claims loss. Given that we are the owner of the value chain, managing general agent for our insurance book, and the processor of all claims, we were able to quickly optimize the retail price to adequately cover costs. In addition, we introduced rental car sub-limits and leveraged multiple touch points, such as a text message to warn drivers of the open road dangers, in their home language.
This is a leading example of how data insights from one area of the value chain (our claims data) enabled changes in another (product and price point) that drove better outcomes for both the customer and our partners. We were able to quickly react with product tweaks that meant our partners could keep selling and their customers could keep traveling, which was possible as we own all parts of the value chain.