Missed your connecting flight? Sitting on the tarmac unable to take off? Berkshire Hathaway has made a big bet that you’re your travel delays, delayed and lost luggage, and missed connections are money in the bank—yours and theirs.
This past January Berkshire Hathaway Specialty Insurance acquired the assets of the Noel Group’s MyAssist and Insure America in order to move into an area of travel insurance that is different than traditional trip cancellation policies. This insurance focusses on the little inconveniences that bedevil air travel.
Money in the Bank
The innovative AirCare Travel Insurance product is sold for only $25 a domestic flight, and its key feature is real-time monitoring of your flight status and direct deposits into your bank account.
Berkshire Hathaway Specialty Insurance promises that their AirCare Travel Insurance will “start rebooking a missed connection automatically. Help replace lost luggage quickly. Even save you a seat in the VIP Lounge.”
All that sounds nice, but it’s the money in the bank that is the big hook. No paperwork, no submitting receipts or claim forms, the real-time monitoring means that while you are working on rebooking your flight a deposit of $50 is hitting your bank account if the departing or connecting flight takes place two or more hours after the originally scheduled flight. The money only goes up from there. You receive $500 for flight delay that causes a missed connection, and $1,000 if you sit on the tarmac for more than two hours.
Lost and delayed baggage pay-outs include $500 for misplaced luggage that is delayed by more than 12 hours, and $1,000 for bags that are lost or stolen.
In addition to direct EFT deposits, travelers can get the more traditional check in the mail, and another innovation enables travelers to get their funds deposited into their PayPal account in lieu of a bank account.
Weather or Not to Buy Insurance
The convenience of AirCare Travel Insurance is that it can be purchased through a mobile app and charged to a credit card even as you sit in the airport. Purchase rules only require that it only be an hour or more before your scheduled departure and that there not be an active weather warning in effect. This means that as long as the airport is open you can place your bet on your flight being delayed.
Ramping Up Big Time
The new Berkshire Hathaway Travel Protection unit is headed by Noel Group’s John Noel, the man who became a leader in modern travel insurance when in 1985 he launched Travel Guard insurance from his basement home office.
Currently the company has 150 employees at its headquarters in Stevens Point, Wisconsin, and they are looking to hire 2,000 employees in anticipation of strong demand for the new insurance product.
How big is the Market?
The market is huge. John Noel points to the 660 million domestic air travel segments a year, and the 30-percent of all travelers that currently purchase a travel insurance policy, as an indicator of the potential market. That market will even grow larger as an anticipated expansion covering international travel is added on. It’s a total market that currently has no competition, is not covered by travel riders provided by homeowner’s or auto policies, and even if others enter it Berkshire Hathaway Specialty Insurance has positioned itself to be the market leader.
Sounds like money in the bank.
© 2014 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.