Selling Travel Insurance: What’s Best for Clients?

by Barbara Peterson

This is the first of two stories on tour operators’ travel insurance

Given that tour packages often require a substantial financial commitment well in advance of departure, travel agents selling tours invariably recommend that clients purchase travel insurance in case they’re forced to cancel or interrupt their trip.

But the type of insurance—and which provider to choose—isn’t always such an easy call, especially when the tour operator is promoting its own insurance as an add-on to the overall package price.

Several agents said that they sometimes feel pressured to buy tour operators’ insurance, which is usually touted as providing the best protection in case of cancellation.

Easy to sell
“They want us to sell it with every package,” said Sandy Anderson, owner and president of Riverdale Travel in Coon Rapids, Minn., a Travel Leaders agency.  “It’s very easy to sell because it is right there on your screen.”

Anderson said that, at first glance, the advantages of going with the tour operator’s insurance are obvious:  “It’s straightforward; if X happens, then you get all your cash back,” she said.

“And they’re giving us incentives to sell it,” which can put the agent in a difficult position,” according to Anderson.

“I’m not in the insurance business, and what if this isn’t the best policy for the individual client?, “ she said, noting that some tour customers are elderly and may be more likely to develop health problems abroad.  

“What if they get seriously ill and have to be airlifted out?”  In such cases, the fine print of the insurance contract could make a significant difference in the outcome, she said.

Another revenue stream for agents
Jennifer Doncsecz, president of VIP Vacations in Bethlehem, Pa.,  agreed that tour operators are upping the ante.  

“Many tour operators offer ‘goals’ for agencies that include booking their insurance,” Doncsecz said.  

Some operators also have incentive bonus programs that stipulate that “the only way to qualify for the bonus commission is to include their insurance with the booking,” she added.

Of course, insurance sales represent an additional revenue stream for agents.

Both supplier-backed and third party insurance sales are commissionable, but a tour operator’s policy is usually wrapped in to the total package and thus commissionable at the same rate as the entire sale.

For other types of insurance, the rate depends on the price -- and the cost of travel insurance, like all other types of insurance, can vary significantly depending on factors such as the traveler’s age, whether they have pre-existing medical conditions, and the itinerary and duration of the tour.

According to the website www.insuremytrip.com, a policy will cost anywhere from 4% to 10% of the total pre-paid, nonrefundable trip cost.

For a trip with a total price tag of $5,000, for example, travel insurance policies range in price from $250 to $500 or more, depending on variables such as the age of the travelers’ age and the length of the trip.

Doncsecz said that some travel insurance companies often pay a “much higher commission percentage,” than what the tour operators offer with their insurance policies.   

But she added, it’s important to keep in mind that there are benefits to both approaches.

Tour operators’ insurance tends to make cancelling or getting a price adjusted easier than with traditional travel insurance, according to Doncsecz.

But, tour operators’ insurance plans are not nearly as comprehensive as the insurance plans that travel insurance companies provide,” she added.

Agents need to know
Among other things, agents need to know what the overall policy covers, what situations are excluded from coverage (such as a hurricane or civil unrest), and whether there is round-the-clock support for emergencies during a trip.  

Scott Koepf, senior vice president of sales at Avoya Travel, said that he too has noticed that in recent years industry suppliers like cruise lines and tour wholesalers have developed their own insurance programs, both for cancellations and for other situations.

“The truth is that all the suppliers are becoming a little more aggressive in trying to get the consumer, via the travel agent, to purchase their own program,” said Koepf.  “After all, there is income to be made.”

Koepf said, however, that the real challenge can be to persuade consumers to not just buy insurance but to carefully consider what they’re getting.  It shouldn’t be regarded as just one more optional feature to tack on to the tour price, according to Koepf.

“We insist that consumers buy insurance,” he said, adding that it’s important to have a written record that it was offered  to avoid any misunderstandings down the road if the client insists on declining it.

(Avoya has arranged for Allianz Global Assistance, a travel insurance company, to be its preferred provider, he said.)

Two different sales
“Two different sales have to occur,” Koepf said.  “First, you have to convince them to get it in the first place, and then you need to determine where to get it—either through the supplier or a third party.”

There can be some advantages to going directly through the supplier, especially when it comes to cancellations before the trip, due to illness or other emergency, Koepf said.  

“But when you are considering insurance,  you are looking at two primary things: One, anything that can happen up to the trip that could cause you to cancel, and the other is a catastrophic event during the trip. “

The latter is “where real dollars come into play, “ he said.  “You could lose the whole value of your trip,” and end up paying out-of-pocket for medical and transportation expenses, which might not be fully reimbursed later on.
 
“A good travel agent explains what the policies are and the range of coverage,” he said. “It’s a very important part of what an agent brings to the transaction.”   

That’s another, critical way agents demonstrate their value. A consumer shopping online wouldn’t have someone there to explain the benefits fully, said Koepf.

Next time: Tour ops’ and travel insurance companies perspective


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