Introducing new products is an uphill battle for travel insurance companies, which face strict regulatory oversight before they can bring a product to market. As points of differentiation, many insurers have opted to invest in technology and service improvements, but those that do choose to innovate their products, or even modify them, often face a lot of speed bumps.

"Because insurance is regulated on the state level, insurance providers need to file products in 50 different jurisdictions, which can really slow down the introduction of new products," said Megan Freedman, executive director of the U.S. Travel Insurance Association. "It can be a very cumbersome process to file new policy language due to the time needed to get all states onboard."

Before a carrier decides to file a new product, it must first commit to an internal process of development, according to Jason Schreier, CEO of April Travel Protection.

"You've got the actuarial part, the risk part, the numbers part of it, where people have to put their jobs on the line because they're the guy who's supposed to crunch the numbers and say, 'Well, we're going to win on this bet,'" Schreier said. "First, it takes that leap of faith where somebody's going to come up with some kind of new type of if-then situation: If you go and do this on your trip and this happens, then we'll pay you out X amount of dollars."

Once that process is complete, the regulatory process begins.

James Page, senior vice president and chief administration officer for AIG Travel, said, "When it comes to innovation, there are certainly challenges that our industry must work through due to the regulatory environment in which we operate."

The fact that insurance is regulated on a state-by-state basis "is a significant consideration and potential obstacle" to product innovation, Page said.

Insurers have to deal with a number of factors throughout the 50 states, complicating the filing process. For example, Schreier said, annual travel insurance policies are not permitted in some states, while others prohibit rental car collision coverage, which is often an add-on consumers can tack onto policies. In New York, cancel-for-any-reason insurance is not permitted.

"Those are just some small examples of what we're talking about here," Schreier said. "Just because you've got something that has got great demand and makes sense for all parties involved, it doesn't mean that every state is going to approve it."

Filing also takes time. Joe Mason, Allianz's chief marketing officer, said the length of the regulatory process depends largely on what an insurer is filing. While a change to an existing filing might take a few months, "other times it can be a totally new filing, which can take over a year."

"It's one of the challenges of being in a highly regulated space," Mason said. "You do have to file in all 50 states, and filings in all 50 states, unfortunately, takes time. States have different timelines with which they work with us."

Berkshire Hathaway Travel Protection recently introduced a product, ExactCare Extra, marrying its traditional coverage (ExactCare) with fixed benefits for things like baggage loss and flight delays, a product first introduced several years ago under its AirCare plan.

Jill Groshek, vice president of underwriting at Berkshire Hathaway Travel Protection, estimated that the company had probably been talking about ExactCare for about a year before it was actually introduced after going through the regulatory process. And in the case of ExactCare Extra, Berkshire Hathaway Travel Protection was not required to file the product in every state, as some allow for modifications to existing products.

"There are some states that are reasonable and allow you to make logical changes to your product as long as you have outlined what they are," she said.

Regardless of the number of filings, Groshek believes ExactCare Extra went through the regulatory process faster than the average policy change, a fact that she attributed to her team's expertise in the space.

Innovation happens in the travel insurance space, but it just takes longer, according to Stan Sandberg, co-founder of the insurance comparison and purchasing website

"I do think there is product innovation," he said. "It just happens on a longer time cycle, and so there's not the ability to constantly tweak -- either introduce or remove benefits -- or to have a novel approach to a particular risk, for instance. But nevertheless, you do see some product innovation."

Instead of differentiating with product, many insurers have turned to offering service and technology benefits.

For example, April offers Stress Less benefits, enabling customers to reach out to the company through their channel of choice, such as Skype or texting. When possible, April directly pays for most insurable events in real time.

Travel Insured International just released a technology innovation, Bulk Quote, which enables agency owners and managers to quickly identify any upcoming trips that lack an insurance component. It then automatically sends quotes to the client or booking agent.

Isaac Cymrot, Travel Insured International vice president of industry relations, said, "You have to differentiate in other areas -- technology, people -- and that's where we love to compete."

Looking to the future, the verdict is out on whether or not the process of making policy changes or introductions will become easier for carriers.

"I think everyone hopes that we will create a more efficient industry," Mason said, "and by more efficient industry, we're talking about making changes that are good for consumers that consumers are requesting and getting them in their hands more quickly. I don't want to speculate on whether that's going to be easier or more difficult in the future, other than to say our wish is that it becomes easier."

The regulatory process is not necessarily a bad one for the consumer, according to Schreier.

"It means they've got a lot of people watching out for their interests," he said. "It means the barriers to entry coming into this market are still rather high. It's going to weed out, hopefully, some people who maybe shouldn't be playing around in this area, and ultimately I think that's probably good for the consumer."


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