Five years after the U.S. Travel Insurance Association (USTIA) and ASTA began their effort to simplify the hodgepodge of state laws and regulations governing the sale of travel insurance, 31 states have adopted a standardized law that for the most part enables agents to sell travel insurance without a license.
The most recent state to enact the standardized law was Delaware, which approved the legislation last summer. It goes into effect in January.
These new laws are all based on model laws adopted by the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL). Both groups worked with USTIA and ASTA to craft the laws.
Jack Zemp, vice president and deputy general counsel for Allianz Global Assistance and lead member of the USTIA’s law and regulation committee, said regulators were open to providing agents with a workable solution while continuing to provide consumer protections. (Click here or on the image for a larger view of a map of the states that have adopted the travel insurance model law.)
The model law allows travel agents to “offer and disseminate” travel insurance. It’s a semantic subtlety that means agents can offer general information, process the application and collect the premiums, for insurance. That’s different from fully licensed insurance agents who under state laws are authorized to “sell, solicit and negotiate” insurance.
The model law means agents can sell travel insurance to their clients under the umbrella of travel insurance administrators, usually the travel insurance companies with which travel agencies work.
Administrator companies are fully licensed, certify that agents are trained and keep a registry of agents who sell their products. Agents are essentially disseminating information for the licensed travel insurance company.
“Travel agents are not in the business of acting like a professional insurance agent,” Zemp said. “Instead, they are focused on setting up quality trips and offer travel insurance as protection to make the experience better.”
Agents can provide clients with information that enables the clients to make an informed decision, then process the application and premium payment. But John Pittman, ASTA’s senior vice president for industry affairs and marketing, said that if a client has specific questions about travel coverage, agents should bring the insurance provider into the process.
Moreover, agents selling travel to residents of the 19 states that have not passed the legislation still need to be licensed.
“Even if a state has adopted the model act and a license is not necessary, you need to retain that license if you plan on selling insurance in other states,” Pittman said.
Typically, travel agents need a limited line license to sell insurance; nonresidents of states can get such licenses, but they usually need to have them in their home states in order to get a nonresident license in one of the 19 states that have not adopted the model. Because of this, many insurance companies require agencies to hold a limited line insurance license even if they live in a state that has adopted the standard.
And even in states that have adopted the standard, there are some variations. Washington, for example, requires agencies to register with the state insurance commission. Previously it had required individual travel agents to register.
California removed its lost-cost limited lines insurance option; the state’s regulators and insurance companies are developing work-around solutions for California agents that have customers in other states. Zemp said that the USTIA and ASTA continue to work on correcting these problems and getting the 19 other states to pass the law.
Individual insurance companies, the USTIA and the ASTA Corporate Advisory Council funded the $1.6 million advocacy campaign to standardize state insurance laws.