Flight delays are an all-too familiar occurrence these days for any travelers. The announcement, the scramble to reschedule (and sometimes to find a place to sit with a plug for your phone or laptop), and the inevitable search for a way to make the time productive until the alternate flight takes off.
It’s a risk, and like all risks, it also presents an opportunity. One that startup Cleverea saw as a way to create value for all involved in the scenario: customers, insurers, even retailers in airports. Their idea: provide a flight delay solution that will compensate passengers for delays of fifteen minutes or more, with a flexible view of what that compensation might be. Perhaps a credit for airline lounge access, or a retail credit for shopping in one of the stores. The flight delay offering will be complemented in future by other products covering related risks (e.g., lost or delayed baggage, missed connections, etc.). The goal? A comprehensive value proposition for the day of travel.
The hope is to launch in Q1 2020 upon receipt of regulatory clearance.
Building from expertise in insurance and travel, founders Alvaro Sanz, Javier Bosch Liarte, and Joan Bosch Liarte sought a nexus where better digitalization, fairer premiums (adjusted to each person), improved claim process, and a real need came together. It’s a complex space. “You need to know the relevant industries,” says Joan, “and understand regulation in each country, as well as a long value chain where it’s often hard to know who takes care of all the details.”
While the product is unique, the startup challenges are the same and familiar to most insurtechs. Build a team, get funding, find partners in necessary industries, and, given the nature of the venture, get regulatory clearance. And, Joan laughs, don’t forget one of the key challenges with insurtech: “People never wake up deciding to buy insurance – you need to find a way to market. Current incumbent offerings are very complex, it’s not a recognizably digital product, it’s not transparent, and it’s far from being sexy.”
“The component pieces are there for what is essentially a parametric product, where the payment is triggered by the flight delay” says Joan. “One big chunk is technology. Data is another. Risk modeling is yet another. And then there are distribution channels. Finally, there’s the regulatory piece.”
Fortunately creating the team came easily, drawing on Barcelona’s vibrant startup ecosystem, where many people are motivated by the challenge of doing something new.
Getting the data was also fairly straightforward, with reliable data available going back twenty years. Joan points out that “Data is not an issue in this product. You just buy the records – then you need to make sense out of it. That’s where the risk model comes in.”
The hardest part? “In our case, regulation,” Joan admits. “Finding the risk carrier is the hardest thing. You need to know the right person and go through the right door. In our case, we want to build this company in a global way – we’re aiming at European passengers. We wanted a risk partner that could offer us access to the European market at first but could then accompany us elsewhere.” The ultimate goal: to use this product to create a new customer experience and gateway for first-time insurance buyers to access a broad range of insurance products.
“Insurtech is a puzzle, and you need to manage all of these pieces at the same time, not just connect them one by one in series,” notes Joan. “For example, you won’t get the distribution agreement if you don’t get the license. We’re modeling all of them together, and as you move forward, you can connect another one.”
And what are their longer-term fears as they hope to create the very first tech-enabled MGA in Southern Europe? “It’s very basic, I’m afraid,” says Joan. “What’s the value for money? In any other industry you pay, and something gets shipped to your house. You get a box and you can open and see. In insurance you get a piece of paper – it’s hard to understand the value. The peace of mind is not enough – value-adding services such as lounge access, discounts, or a smart notification system all add up to trying to get the customer to better perceive the value we offer.”