I written about insurance many times before, but it really is the low hanging fruit of ancillary revenue. Previous posts have covered where to sell in the booking flow and Air Caraibes success with insurance, but there really isn’t too much innovation left in that product category, especially when compared to a quasi insurance product such as price drop protection. I first wrote about this idea for airline direct channels months ago when Priceline announced their policy, and then today I see Travelocity upping the ante with a new improved pricedrop protection guarantee. The innovation in this area is clearly happening in the OTA space, so today’s talk of Best Western hotels opting out of Expedia in favour of direct distribution would be a very brave move indeed.

If someone can tell me of an airline offering genuine price drop protection insurance (without harsh conditions that make it too difficult to claim, or that only pay in vouchers) I will happily stand corrected,  but why on earth are airlines letting the OTA’s be the innovator in this space, when the benefits of an airline website offering such a policy are to me, as clear as day.

Such a policy (I would not recommend giving it away, as there is defininte value to the passenger) would accellerate the move of long haul traffic from travel agency to direct channel; even better, a smart airline could even incorporate the expected payout into yield management decisions. It is almost like the old standover tactic of paying the mob for protection; the “insurer” decides whether your shop burns down or not! Any opportunity to engage in a legal transaction that removes the adverse selection risk and moral harard from the buyer in an insurance sale has to be a clear winner for he who holds the cards – in the case of price drop protection, the royal flush is firmly held by the airline.