In a travel industry where uncertainty reigns and risk is everywhere, travel insurance not only provides travelers with peace of mind should something unexpected negatively impact their travel plans, it also represents a highly attractive travel affiliate revenue opportunity.

Travel insurance is a relatively large travel niche; according to a recently released survey sponsored by the US Travel Insurance Association (UStiA), American travelers spent nearly $1.6 billion on travel insurance in 2008. Other salient statistics from the Travel Insurance Market Survey2006-2008 reveal that this niche has experienced – and will likely continue to experience – high growth rates and :

  • Sales of travel insurance has grown at a CAGR of 13% during the two year period
  • Trip cancellation-interruption insurance policies represent 90% of the market
  • Medical and medical evacuation policies, while accounting for only 5.5% of the total travel insurance market today, is seen as the industry’s hottest growth opportunity – this segment has grown its market share by more than one third since 2006
  • More than 28 million travelers purchased travel insurance policies from UStiA member companies; these insurance policies covered nearly 120 million US travelers against various types of travel-related loss in 2008, representing a year-on-year growth rate of more than 35%

In the press release announcing the survey results, Mike Ambrose, UStiA President said “The figures tell us that, even in the face of last year’s challenging economic climate, Americans increasingly recognize and value purchasing travel insurance.  People may be spending slightly less for their coverage, but they still want to protect their vacation investment from any number of unforeseen circumstances.”

Ambrose went on to say that unforeseen circumstances include  “…needing to cancel or interrupt a trip because of illness, accident, or even job loss; paying for overnight accommodations and incidentals because of flight delays or cancellations caused by bad weather; or arranging for and reimbursing emergency medical treatment or evacuation overseas.”

TravelDividends agrees with Ambrose’s overall contention that as the future prospects of our economy remain nebulous (or worsen), travel insurance becomes an increasingly smarter buy for travel consumers…and more importantly, this trend translates into increased sales and profits for travel affiliates who actively work in this niche.

Travel affiliates can assess the revenue potential associated with selling travel insurance in two ways:

1.      Travel insurance generally costs between 4% to 8% of the total trip; generally speaking, the cost is based on the length of trip, destination, and age of policy holder

2.      Commissions paid by travel insurance companies to travel affiliates can range from 15% of the premium associated with travel insurance policies providing annual coverage, to up to 45% of the premium cost for most of the other types of travel insurance a traveler buys

For example, let’s assume a family of four traveling on a 7 day package to an all-inclusive resort are each paying $1,000; selling a travel insurance add-on (e.g., a package plan that includes Trip Cancellation [$250 p/p], Baggage, Medical [$50k], Dental, Emergency Evacuation, 24 Hour Traveler Assistance, Baggage Delay, Travel Delay, and Accidental Death Coverages) could generate a commission back to the travel affiliate of about $72.00 (i.e., $1,000 X 4 = $4,000 X 0.04 = $160 X 0.45 = $72.00).  It is important to note that this example is meant to be illustrative, as the commission ultimately earned can be far greater (or less) depending on the coverage amounts associated with the various components of the insurance coverage.

Another important finding of the Travel Insurance Market Survey2006-2008 revolves around the distribution channels used by UStiA members: while travel agencies and travel suppliers like tour operators and cruise lines continue to account for the lion share of sales (about 75% of total), the “…most impressive inroads were posted by other channels of sales: online travel agencies, airlines, brokers, internet sites and direct to consumer sales…While accounting for 25% of the market, these avenues saw a growth rate of over 40%” during the study’s 2 year window.

The “internet sites” the study refers to are sites owned by travel affiliate marketers.  Currently, UStiA shows 20 insurance companies designated as full members, which in total, represent more than 90% of the U.S. travel insurance market.  Among this membership rank, TravelDividends has determined that three companies distribute through travel affiliates, and each is one of the largest players in the market: Travel Guard, Travelex Insurance Services, and InsureMy Trip.

TravelDividends profiled the travel affiliate programs for Travel Guard and Travelex Insurance Services along with two other insurers not members of the UStiA, Global Underwriters and HTH Worldwide, on our Travel Insurance Program overview section.

Here’s the ‘skinny’ on InsureMy Trip.  Unlike the other players that support the travel affiliate channel, InsureMy Trip is not an insurance firm; rather, they are the leading consumer-oriented online travel insurance aggregator that also features an underlying meta-search technology platform.  Similar to aggregator models in the travel industry, (e.g., hotels.com, viator.com, i-explore.com, etc) InsureMy Trip is a one-stop resource for consumers looking to compare and buy a wide range of travel insurance products (from multi-coverage package policies to specialized medical emergency and evacuation plans), all offered by the top U.S. insurance travel providers.

More importantly for travel affiliates, InsureMy Trip also offers both a standard travel affiliate program and a private label program, though their affiliate program pays travel affiliates for lead generation rather than on the CPA model like the traditional travel insurance players.

Essentially, their standard affiliate program (which allows the travel affiliate to co-brand with InsureMy Trip) pays a $10.00 fee for each visitor referred to InsureMy Trip from the travel affiliate’s site.

The Private Labeled Travel Insurance Engine provides an integrated technology solution for the travel insurance industry, and within that context, InsureMy Trip acts as the ‘Intel inside’ for more than 2,000 private-labeled and co-branded travel-related websites around the world.  Their private label program also pays a $10.00 fee for referring visitors, whether the visitor buys an insurance product or not.

Whether travel affiliates choose to work with the traditional travel insurance firms like Travel Guard and Travelex, or an aggregator like InsureMy Trip, TravelDividends believes travel insurance should be an integral part of any travel affiliate’s product portfolio.  What’s your opinion of travel insurance programs?  How effective have these programs been for your business?  What approaches to this niche would you recommend to other affiliates?   We appreciate receiving your feedback; drop us an email…we look forward to hearing from you.

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