Tour Ops’ Own Insurance: Good for Agents—and Clients?
by Barbara Peterson /This is the second of two stories on tour operators’ travel insurance
Tour operators selling their own insurance: is this good for travel agents?
More suppliers are peddling their own branded trip insurance, but agents should still weigh the pros and cons for clients.
Travel insurance sold by agents has been on the rise in recent years, with more than half of agencies reporting that insurance sales were up in the first half of last year, according to ASTA.
And at least part of this increase is from sales of “white label” insurance policies that are sold through tour operators and other suppliers under their own brand – often pitched as either more affordable or more comprehensive, than other insurance products in the market.
Tour ops’ insurance
But is this good for agents and their clients?
While some travel agents report feeling pressured to buy the suppliers’ product, many tour operators contend that their bespoke programs are tailored with the clients’ interests in mind, based on longtime experience in the market.
“We have always had own branded insurance; we’ve had it from day one,” said Nish Patel, COO of Downer’s Grove-based Mayflower Tours COO, which specializes in escorted group tours, such as motorcoach excursions.
Patel said that most of his customers don’t need much persuading to purchase insurance to cover trip cancellation and other disruptions.
“Our demographic is the senior market,” he said, and “if they put their money down on something, they’re making that commitment to go.”
He added that clients are very aware that things can go wrong between the time of booking and departure and want to protect their investment.
With that in mind, Mayflower designed an insurance policy that is especially “lenient” about reasons for cancellation, according to Patel.
“You can cancel for any reason, which is unusual,” he said, the only requirement being a 24-hour advance notification. If someone has to interrupt a trip, Mayflower will reimburse them for the unused portion of their package.
And it also covers pre-existing medical conditions. For example, if a client had a heart problem or other condition that had stabilized at the time of booking, but was later unable to complete the trip, he or she would be protected -- the only proviso is that they must pay the premium within seven days of booking.
Fully 82% of Mayflower’s travelers purchase the operator’s trip protection plan, Patel said , adding that 70% of its bookings come through agents or other travel professionals.
They earn the same commission rate on the insurance portion as they do on the entire package. “So if it’s a 12% commission on the package, it’s 12% commission on the insurance.”
The price of the insurance varies according to the package. Protection for an 11-day motorcoach trip to Yellowstone National Park, for example, with a rate of $2,899 per person, double, would be $100 per traveler for the land portion, and $150 if the client is purchasing an air inclusive package.
Enhancements
Since package tours tend to appeal to an older clientele, other operators told Travel Market Report that they’ve continued to enhance their policies to cover a wide range of circumstances.
“Many of our travelers book their trips with us as much as a year in advance,” said Priscilla O’Reilly, a spokeswoman for Overseas Adventure Travel (OAT), in Cambridge, Mass. She described the company’s client base as Americans over 50.
“They want an assurance that if something unexpected comes, their investment is protected.”
O’Reilly noted that this was especially true after 9/11, when the company worked to enhance its existing policies so that if travelers had to change plans close to departure, they would be fully reimbursed.
The plan developed with the company’s insurance partner, Trip Mate, offers refunds in the form of cash or vouchers or a combination of the two, depending on how far in advance of a departure the cancellation occurs.
The cost of the policy is about 10% of the price of a client’s trip, she said, adding that 80% of OAT’s 115,000 annual customers purchase the product.
Encouraging insurance purchases
At Trafalgar Tours, based in Los Angeles, “approximately half of all guests purchase travel protection,” said Lisa Tran McKee, a spokeswoman, adding that the company encourages travelers to purchase insurance, whether it’s their branded version or insurance from another provider.
But there’s no hard sell: “It’s completely optional,” McKee said. Clients aren’t asked to sign a waiver, although some travel agencies selling big ticket items like tours ask clients declining insurance to sign a form indicating they were offered protection.
Agents aren’t paid incentives or bonuses to sell Trafalgar’s branded travel insurance, which is underwritten by Transamerica, according to McKee.
“We price it as attractively as we can to encourage people to be covered.”
Insurance companies’ stance
As for the actual insurance providers themselves, most of them work with both agents and tour operators.
If asked, though, most would agree with Allianz.
The company told Travel Market Report that “it’s in the best interests of consumers to purchase insurance policies from independent insurance companies,” which can offer” a variety of products, like 24/7 assistance.”
It added that another benefit is that travel insurers “are highly rated for their financial stability” – which brings to mind another type of insurance -- against a company shutting down before the trip.
But while that was once a hot issue in the tour business after some high profile failures years go, the US Tour Operators Association (USTOA) requires members to participate in a “$1 million travelers assistance program,” guaranteeing that the company has put that amount into an escrow account to protect customers in the event of a bankruptcy or cessation of business.
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