Seeking a standard for travel insurance sales

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 Eben PeckTravel insurance -- that is, coverage for trip cancellation or delay, accident or medical expenses while traveling, loss of personal effects, etc. -- offers tremendous value to travelers. Agents have long recognized the importance of offering travel insurance to their customers, especially those taking that "once in a lifetime" vacation. And travel insurance not only provides value for the customer, it's also a great source of revenue for travel agents.

Several years ago it became clear that the current travel insurance regulatory system was broken, and ASTA, working closely with the U.S. Travel Insurance Association (USTIA), started to actively seek a remedy.

The problem with the current system is twofold.

First, many states treat travel agents as something they are not: professional insurance agents. Unlike your typical auto insurance or homeowner's agent, travel agents make only a small portion of their overall income from insurance. A travel agent's main motivation is to offer a true value-added service and to do what they can to ensure that their clients are protected in case an unforeseen event disrupts their trip.

Unfortunately, state regulations are geared for more traditional insurance products, and each state has its own regime for regulating insurance. For agents offering travel insurance, this can mean a lot of regulatory inconsistency. For example:

  • Some states issue licenses to agents or agencies; some don't;
  • Eleven states require fingerprinting for sellers located within the state.
  • Three states require fingerprinting for nonresident sellers.
  • Several states require training and testing.
  • A few states require one person in the agency to be registered, while others require that every employee offering insurance be tested, fingerprinted and licensed.

Travel agents are not professional insurance agents, and it makes no sense for them to be regulated as such. Travel agents do not "sell" travel insurance and do not hold themselves out as insurance experts, risk assessors or anything of the sort.

An agent is more akin to a referral agent whose role is to bring the availability of insurance to clients' attention and provide a means by which clients can get more information and buy the service if desired.  

Second, the travel distribution landscape has changed dramatically. The advent of the Internet and electronic ticketing has transformed the retailing of travel from a large network of firms doing business with a local clientele into a multistate business in which small firms all over the country sell to clients all over the country.

This increase in reach is not limited to the online travel agencies (Travelocity, Expedia, Orbitz, Priceline, etc.). The low cost of marketing penetration through the Internet has enabled travel agencies of all sizes and types to reach out to new markets, often markets very distant from their physical location. And in our increasingly mobile society, the move of a client from one jurisdiction to another no longer means the automatic loss of the client by the local agency.

These trends are to be welcomed, but they become a problem when states require travel agents to obtain out-of-state licenses to offer travel insurance.

While some states don't actively enforce out-of-state compliance, some, like New York and Washington, do. We estimate that it could cost almost $41,000 and take six months for an average-size agency to be fully compliant in every state under the current system. That's an unacceptable status quo.

Yet, changing state regulations, in some cases laws, in all 50 states is not a simple proposition.

Despite this, ASTA and the USTIA have had some remarkable success.

Travel Insurance Deregulation Across the CountryIn 2010, we were able to persuade the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) to create a set of travel insurance standards for all states to follow. (Click on the image, left, for a larger view of a map of travel insurance regulation rules across the country.) 

That, we've learned, was the easy part.

While the states' insurance commissioners agreed to the standard, every state has its own process for putting the standards into place. Some require a regulatory fix, which the insurance commissioner can pursue on his or her own. Other states require a change to the law.

Kansas is an example of the former. Examples of the latter are Kentucky, Florida and Minnesota, which recently enacted the new standard with the help of a strong grassroots push by ASTA members, all without a single "no" vote in the legislatures. (A bill to put the standard into place is also pending in California; agents should click here to weigh in offering support.) 

State adoption of the new standard is also complicated by the fact that not only do regulators tend to be reluctant to give up any of their powers, but eliminating travel agency insurance licensing also eliminates revenue -- no small consideration in these austere times.

As we push forward with our allies on this issue, we view this campaign as a "win-win-win" for agents, insurance providers and consumers alike. Setting common standards provides a solution to the regulatory morass that makes it difficult for travel agencies, especially those that are small businesses, to participate in the travel insurance marketplace.

Travel insurance deregulation is one of many issues ASTA is working on that will have an immediate and tangible impact on both your bottom line and how you run your business. And it is another reminder of why it is crucial to have a strong and united travel agency industry supporting ASTA in our work.

Once the NAIC/NCOIL standard is in place across the country, agents will be able to focus on what they do best: selling travel.

Eben Peck is ASTA's vice president for government affairs. Contact him at [email protected].

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