Eye on Travel Insurance » Why are there no travel insurance companies?

By Wayne Wirtanen

by Wayne Wirtanen, Contributing Editor

Riddle time! Why are there no travel insurance companies, and when is travel insurance not travel insurance?

These seemingly ridiculous questions bubbled to the surface of my research as I was looking into the issues involving a company which claimed they were selling not travel insurance but “travel protection.”

In August 2006, the Texas Department of Insurance issued an emergency “cease and desist” order against Trip Assured, Inc., of Crossville, Tennessee (www.tripassured.com), “which has been selling travel insurance in Texas without a license.”

On Oct. 4, 2006, the California Department of Insurance also issued a “cease and desist” order against Trip Assured. Insurance Commissioner John Garamendi’s news release stated, “No matter what Trip Assured wants to call it, the product they are offering meets the definition of insurance. This company’s whole reason for being appears to be to defraud and intimidate senior citizens.” Trip Assured countered that what they were selling in California was not “travel insurance” but “travel protection plans.”

Similar actions against the company were issued by the insurance-regulating agencies of Michigan, Tennessee, North Carolina and Florida.

The language and definition of any kind of insurance are important because the selling of “insurance” is a licensed activity and is regulated by state agencies. It appears that Trip Assured did not have the required licenses. The “cease and desist” order from Tennessee and its insurance commissioner, Paula Flowers, stated that Trip Assured, by engaging in insurance business in the state without a commissioner’s certificate and thereby avoiding normal regulatory oversight, “leaves policy holders in danger.”

At least one class action suit was initiated, and claims of “alleged fraud” against senior citizens were topics of discussion in numerous news stories. These were some pretty serious allegations.

One reported instance of possible “fraud” that was played up widely in the media was the result of a claimant’s apparently not having read the fine print in the purchased “policy.” The claim for reimbursement of trip-cancellation loss was denied because the claimant failed to meet the requirements for a physician’s written recommendation for cancellation plus timely notification of cancellation to Trip Assured, as stated in the policy’s paragraph on trip cancellation. This hardly warrants an accusation of “alleged insurance fraud” on Trip Assured’s part, in my opinion.

Another complaint commonly found in the media and news releases was that senior citizens had been targeted for intimidation and worse. That seemed to me to be a nonissue since senior citizens are the most frequent travelers and are thereby automatically the most likely purchasers of travel insurance. I found no evidence that seniors were specifically targeted; Trip Assured’s “travel protection plans” were sold widely to all travelers.

This isn’t to say that Trip Assured is in the clear. The resolution of all of the claims, “cease and desist” orders and lawsuits has yet to be accomplished.

Further information

For those of you who are compulsive readers or who have purchased a “travel protection plan” from Trip Assured, you can read more about this ongoing saga at the following Web locations:

But back to the riddle: why are there no travel insurance companies?

The short answer to why there are no travel insurance companies is that the companies which we commonly refer to as travel insurance companies are not insurance companies at all but are suppliers/providers (and administrators) of travel insurance policies that are backed up by actual insurance companies.

This is an important distinction. Prudential, for example, is an insurance company; Travel Guard (800/826-4919, www.travelguard.com), a reputable travel insurance provider, is not an insurance company. Their website states, “Travel Guard International is the industry’s leading provider of travel insurance plans.” They are underwritten by National Fire Insurance Company of Pittsburg, Pennsylvania, which is an insurance company.

A brief description of how the travel insurance industry is structured

There are basically three types of players in the travel insurance business: 1) underwriters, 2) policy provider/administrators and 3) agents/brokers. Each functions with different responsibilities to produce the travel insurance policies that are purchased by some 30% of overseas travelers.

1. An underwriter is the insurance company that negotiates with the individual “provider/policy administrator” (Travel Guard, for instance) in designing the terms and conditions and establishing the prices of individual provider company policies. The underwriter is the one which ultimately takes the risk.

2. An administrator/provider (Travel Guard again, for example) processes applications, administers policies and claims, and sells policies directly or through agents/brokers.

3. Agents, such as your travel agent or tour/cruise company, most commonly sell only one company’s or a few companies’ offerings. Brokers, such as Dan Drennan of Travel Insurance Center (866/979-6753, ext. 3621, or 402/343-3621, www.travelinsurancecenter.com), sell policies from a variety of companies’ offerings.

(It costs the same to buy a policy from an agent or a broker as it does directly from an individual administrator/provider. In my opinion, using a broker has the advantage of providing access to more policies, one of which might best provide the particular needs of a traveler.)

The rest of the riddle — when is travel insurance not travel insurance?

The best example of what is commonly considered a form of travel insurance but is not is emergency medical evacuation coverage as that supplied by many independent companies. This service does not provide any actual medical expenses; rather, it only provides transportation to an appropriate medical facility or all the way home, if necessary, because of illness or accident while overseas.

These companies provide evacuation service only and, as far as I have been able to determine, are not regulated by any governmental agency. However, emergency medical evacuation is included as a benefit in most comprehensive travel insurance policies. Any benefit included in a travel insurance policy is an insured benefit and is therefore subject to governmental regulation.

Another example — On Trip Assured’s website, the brief description of services lists the feature of “Trip Cancellation/Interruption permitting rebooking with no penalties.”

In other words, they do not guarantee to replace funds lost due to cancellations/interruptions as do standard travel insurance policies; instead, they guarantee only that you can rebook without a rebooking penalty. Apparently, they will pay only the modest rebooking fee to the tour company rather than refund to the policy holder the more substantial funds lost due to the trip cancellation.

In my opinion, the “rebooking with no penalties” is a poor substitute for receiving replacement of forfeited funds in cash.

Conclusion and recommendations

What does all of this mean for the average purchaser of travel insurance? Mostly not much. The Trip Assured problem is an unusual and, thankfully, relatively rare one. In my 20-plus years of researching and writing about travel insurance, this is the first example I’ve seen of a company being censured for allegedly selling travel insurance without a license. Instead, they were calling it a “travel protection plan.”

All travel insurance articles urge you to read the fine print. However, this is not always easy or convenient to do, as a travel insurance policy is a relatively complex legal contract. If you choose to not read the fine print of a travel insurance policy, make sure that you are buying it from a reputable travel insurance provider.

Among reputable travel insurance providers are the members of the U.S. Travel Insurance Association, or UStiA (800/224-6164, www.ustravelinsurance.org). UStiA’s mission is to “. . . foster ethical and professional standards of industry conduct. . . .”

(In future articles, I will continue to refer to “insurance providers” as travel insurance companies — technically incorrect but simpler to understand. They are the ones providing the insurance, after all.)

For a list of UStiA members (which supply 90% of American travel insurance policies), call the association or visit their website. On a recent online visit, I found that Travel Guard and 31 other providers were members in good standing. Trip Assured was not listed.

Looking at a non-UStiA member?

Someone who will be on your side if you are considering purchasing a travel insurance-related product from a non-UStiA company is, again, a travel insurance broker.

I recently had occasion to ask Dan Drennan about the economical travel insurance provided by STA Travel (800/387-2427, www.statravel.com). STA is not a member of UStiA. Also, it does not appear on any Internet comparison lists primarily because, to save on commission costs (generally 30%-35%), they do not sell through agents. This is also the profile of the economical service of Divers Alert Network (800/446-2671, www.diversalertnetwork.org), which provides emergency medical evacuation coverage.

Drennan was able to reassure me that these two sources of travel protection were well established and reputable companies.

Remember that probably all of the Internet travel insurance comparison/recommendation websites, such as www.insuremytrip.com, are selling something (which is perfectly okay). However, be aware that I do not and ITN does not sell any travel insurance product, nor do we have any financial bias influencing travel insurance articles and recommendations.

What to do if your claim is rejected

If you are dissatisfied with a rejected claim, here are the steps to take.

1. Carefully review the applicable fine print on the policy. Expect the travel insurance company’s letter of rejection to specify exactly and clearly why your claim was not accepted.

2. Write to the person signing the rejection letter (saving copies of all correspondence and replies), restating the details of your claim (with copies of whatever documentation you think applies) and explaining why you think the claim should be reconsidered. Reference the applicable “fine print” in your policy.

3. If you are still dissatisfied, bring your claim to the attention of the Better Business Bureau in the city where the insurance company is based and also to the State Insurance Commission in your state and in the state where the insurance company is based. Stating the basis of your complaint, supply copies of your applicable documentation and copies of all correspondence (in both directions).

If your claim stays in the “rejected” category after all of that, you might as well stop butting your head against the wall and move on.

Claim rejection procedures

I complained in a previous article and vociferously at a gathering of travel insurance executives at their conference in Florida last year that many travel insurance companies have been shooting themselves in the foot, unnecessarily generating bad public relations and producing disgruntled customers by not having a more customer-friendly claims rejection process.

Dan McGinnity of Travel Guard International sent me the following description of their customer-friendly claims rejection procedure: “Travel Guard sends all denied claims to an internal arbitration department. The claim is reviewed to see if there is any portion of the loss that may be covered by the policy. For any denied claim, we personally call the consumer and explain why the claim was not accepted. We then follow up with a detailed letter with a specific explanation. To my knowledge, we are the only company that handles denied claims in this manner.”

On balance, it has been my observation over the years that travel insurance policies have gradually become more customer friendly in the understandability of their fine print and more favorable in their terms and conditions.

Happy trails!