Travel Advisors Face Increasing Uncertainty and Complexity with Travel Insurance

During the last three months, as the COVID-19 pandemic has swept across the globe, travelers and their travel advisors have had to cancel, rebook, and often rebook again, travel plans that five months ago felt like rock solid vacation dreams.

Now, as destinations and travel suppliers announce plans to slowly “reopen,” consumers and their travel advisors are examining their options, and how their travel protection plans can best serve them.

Travel insurance comparison website Squaremouth.com reported a 90% decrease in travel insurance policies purchased for summer trips and stated that “the coronavirus pandemic is the top concern for travelers planning summer trips.”

According to Squaremouth, 36% of travelers looked on their site for a policy that specifically included cancellation or medical coverage in the event they contract COVID-19 or are quarantined.

Most travel insurance providers stopped covering losses related to COVID-19 as early as January 21, the date the first CDC alert was issued, Squaremouth noted in a recent press release. However, some providers have extended coverage and are still offering cancellation and medical benefits relating to COVID-19 on new policies purchased.

As of May 28, 2020, travelers can purchase policies from six providers on Squaremouth.com that include cancellation coverage if they contract COVID-19 or are quarantined. Meanwhile, one third of all policies purchased for summer travel include Cancel for Any Reason (CFAR) coverage (which typically costs 40% more than standard travel insurance policies), Squaremouth said, an increase of more than 680% compared to policy purchases for 2019 summer travel.

A testament to how complex and sensitive the issue has become, multiple travel insurance providers, including Berkshire Hathaway Travel Protection and Arch RoamRight, declined to comment for this story when Travel Market Report contacted them.

For instance, CFAR, considered an all-purpose, comprehensive program pre-COVID, comes with exceptions. “This benefit is time-sensitive and has other eligibility requirements, so not all travelers will qualify,” InsureMyTrip says on its website.

“It’s important for travel advisors to know how travel insurance can help during this unprecedented situation,” said Dan Durazo, Communications Director at Allianz Global Assistance.

Allianz has made “several claim accommodations for trip cancellation, trip interruption, and emergency medical care for those who become ill with COVID-19, and we have extended refunds for travel insurance premiums to customers whose travel suppliers have canceled their trips due to COVID-19.”

Adding more complexity to the insurance purchase decision are supplier future travel credits (FTCs) that provide lengthy calendar rebooking periods. Allianz is essentially converting previously purchased policies into a dollar amount that can be applied to a new trip booked any time within 770 days of the day they originally purchased protection.

Allianz customers moving their existing plan must move their plan coverage dates prior to traveling and prior to any loss for which they are seeking coverage.  If the customer insures a new or rescheduled trip that was paid for with a voucher, any amount paid by the voucher would be considered part of that customer’s trip payments for insurance purposes.

InsureMyTrip said the company’s comparison site is reporting an increase in calls from travelers seeking travel insurance for that future trip after receiving an FTC/voucher from a cruise line, tour company, or airline.

"Travel vouchers are becoming the norm for many travel suppliers as they look to create more flexible cancellation policies due to the uncertainty around the Covid-19 pandemic," said Ronni Kenoian, marketing and ecommerce manager for InsureMyTrip.

But FTCs could leave a client short on the amount of their trip that is covered by their insurance. Take for example a client who pre-COVID purchased a cruise for this spring for $1,000. When that trip was cancelled say in March, they were offered a voucher by the cruise line for $1,250 (including an extra 25% incentive).

If that same client rebooked but spent an additional $500 above their original $1,000 – say to upgrade their cabin or purchase non-refundable add-ons – their original travel insurance policy wouldn’t cover the new, non-refundable payments. They would need to contact their travel insurance company at the time they reschedule, and most likely pay an additional premium.

Dates can trip up insurance coverage
Additionally, some travel insurers are considering the Initial Trip Payment date differently for time-sensitive benefits.  For those purchasing new policies to cover the voucher, some suppliers may consider the original payment date as the initial trip payment, while others will consider the date the new trip is booked to be the initial trip payment date. 

If a customer doesn’t know the dates of a new or rescheduled trip, Allianz will hold their plan open to any time within 770 days of the initial travel policy purchase.  Once they have a new or rescheduled trip booked, they can either call the company or visit a special Allianz web page to change the dates of their policy to match the dates of their new or rescheduled trip.

Meanwhile, supplier policies in some cases may negate the value of some traditional travel insurance features, like trip cancellation coverage. For example, American Cruise Lines is offering passengers with new and existing bookings departing through August 31, 2020, the ability to cancel for any reason up to 24 hours prior to departure and receive cruise vouchers equal to 100 percent of the amount paid. (The cruise voucher can be used for any 2020 or 2021 cruise package.) Companies like Air Travel Guard only offer CFAR insurance coverage for trips cancelled more than 48 hours prior to scheduled departure.

While the travel insurance industry’s ability to rapidly adapt their plans to current events is hampered by state travel insurance regulations, suppliers are introducing their own trip protection plans that could make purchase decisions even more complicated.

In a recent letter to travel advisors from Jacki Marks, Executive Vice President, Trade Brands, Apple Leisure Group (ALG) Vacations, ALG announced it will roll out changes to its travel protection plans on June 8, including three tiers of policies offering a 100% Cash Refund; 50% Cash Refund/ 50% Travel Credit; and 100% Travel Credit.

“While the cost of these plans have increased, we believe we have very fair and competitive price and benefit offerings to help ensure peace of mind for your customers,” Marks said in her letter. The company is not changing its "Cancel for any Reason" policies, she said, adding that the company believes “Travel Protection will be in demand now more than ever.”