Travel insurance regs are easing, but still pose peril
After decades working in the shadow of myriad legal risks, it’s becoming safer for agents to sell travel insurance.
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For years, responsible agents have sold travel insurance that protects their clients and their clients’ vacations should something go wrong, be it a hurricane or an incapacitating illness.
But a Gordian knot of conflicting state regulations meant that agents who sold travel insurance policies could find themselves in violation of state insurance licensing laws. Complying with more than 40 different sets of regulations with varied requirements could cost an agency tens of thousands of dollars, according to estimates compiled by ASTA.
Moreover, some of the laws were draconian. For example, until last year, Alabama required that an agent be fingerprinted before he or she could sell travel insurance to the state’s residents.
But in the past three months, three states have passed legislation that removes those barriers. One of them is California, which is the home of more travel agents than any other state. Washington and Virginia have also changed their regulations, although Virginia’s have yet to take effect.
Other states already in the win column for relaxed insurance regulations for agents are Minnesota, Kentucky and Florida, and legislation or new regulations that would ease insurance sales rules are pending in other states. But because of its size and its history of pro-traveler consumer advocacy, California is a highly symbolic victory.
The changes are coming about thanks to a four-year effort by the U.S. Travel Insurance Association (USTIA), with strong backing from ASTA.
As of last week, the USTIA was actively working with about 20 states to change their regulations, said Jack Zemp, chairman of the association’s law and regulations committee and vice president and deputy general counsel of Allianz Global Assistance.
The USTIA worked with two groups to create a national standard: the National Association of Insurance Commissioners and the National Conference of Insurance Legislators. Though each came up with a different set of standards, they are so similar that they are referred to jointly as NAIC/NCOIL.
The separate standards reflect the fact that in some states, insurance commissioners regulate licensing requirements, while in other states, such requirements must be enacted by legislatures.
So, for example, Washington’s new rules involved regulatory changes, while Virginia’s and California’s were enacted by legislatures.
In fact, however, the USTIA’s victories are not always clear cut. Washington, for example, is only a partial win because its licensing only partially adopts the NAIC/NCOIL standards. However, ASTA and the USTIA are continuing to push for modifications in Washington’s standards.
The goal is for states to allow agents to sell travel insurance without a license, as opposed to requiring what is called a “limited line license,” which many states require today.
Among the states now considering the NAIC/NCOIL standard are Illinois, Maryland, Arizona, North Carolina, Georgia, New Mexico, Michigan, Montana, Oklahoma, Indiana, Ohio, Texas and Wyoming.
ASTA has asked members in some states, including Arizona and Maryland, to lobby for changes, said John Pittman, the Society’s vice president of industry and consumer affairs and consumer research.
Larry Swerdlin, president of ASTA’s mid-Atlantic chapter, testified at a Maryland legislative hearing about agent licensing at the end of February.
The matter is already before many state legislatures now, and in the next two months, ASTA hopes to see more victories for agents, Pittman said.
Among the problems faced by both the states and USTIA/ASTA are licensing models rendered obsolete by the evolution of retail travel. Decades ago, agencies did business locally. Now many agencies have a book of business spread across multiple states.
“We are trying to make sure that the framework matches the business practices of today,” Pittman said.
Zemp said travel agents are not acting like full-fledged insurance agents but simply offering information about travel insurance.
“They’re not acting like a State Farm insurance agent,” said Zemp, who praised NAIC and NCOIL for their response to the issue
The new licensing regulations essentially enable agents to work under the license of the travel insurance companies whose products they’re selling. In each case, the insurance company has to identify itself as the producer.
Selling to clients in other states remains murky if not outright risky. The goal is reciprocity — that is, if buyer and seller are both in states that have adopted NAIC/NCOIL standards, regulators in the buyer’s state recognize the regulations of the seller’s state.
While many states have requirements for out-of-state agents selling travel insurance to their residents, only three are enforcing those requirements, according to ASTA: Texas, Washington and New York.