Travel Insurance Coverage of Coronavirus Continues to Change

With coronavirus news unfolding minute by minute, travel insurers and travel insurance regulators have been trying to adapt policies and rules to better meet consumer needs.

On Monday, Allianz Global Assistance announced it is currently, but only temporarily, allowing specific medical and cancellation claims related to the coronavirus that are typically not covered under its plans.

“For a limited period, the company will nevertheless accommodate claims for trip cancellation and emergency medical care for customers who become ill with the coronavirus, as well as cancellation claims for customers traveling to China, South Korea, and the Lombardy and Veneto regions of Italy,” the company said in a press statement. “This is a temporary action that the company hopes will help customers who become ill or who are struggling with the decision on whether to travel to these destinations.”

Travel insurance claims due to known, foreseeable or expected events, epidemics, or for fear of travel, are typically not covered by standard travel insurance products. However, “until further notice,” the company said it will be accommodating claims for emergency medical care and emergency medical transportation for a customer who becomes ill with COVID-19 while on their trip; trip cancellation and trip interruption if a customer becomes ill with COVID-19 either before or during their trip; and non-refundable, non-transferrable trip cancellation expenses for customers who purchased their plan prior to Jan. 22, 2020, for trips that include stops in mainland China, South Korea or the Lombardy or Veneto regions of Italy, who are departing prior to Apr. 1, 2020.

Customers may also change their plan’s effective dates to cover a new or rescheduled trip. Alternatively, for a temporary period, the company is offering refunds for the cost of the customer’s travel protection plan for trips canceled by travel suppliers due to COVID-19, as long as no payable claim has been filed under that plan.

“This is undoubtedly a difficult time for both travelers and the travel industry,” said Mike Nelson, CEO of Global Travel Insurance at Allianz Partners. “By taking these steps today, we want to support our customers in a very meaningful way. Our ultimate goal is to help both our customers and our distribution partners to navigate what we hope will be a short-lived but admittedly very serious situation.”

New York allows CFAR coverage
At the same time, on Mar. 6, the New York State Department of Financial Services (DFS) issued a letter to travel insurers and travel agents stating that Cancel For Any Reason (CFAR) benefits may be sold in New York by an insurer if necessary or incidental to its travel insurance business, and that non-insurers may also provide CFAR benefits if they are not sold as an insurance product.

The letter further said that “COVID-19 may be a basis for trip cancellation/interruption under a travel insurance policy. Under New York law, CFAR benefits in the travel context do not technically qualify as insurance because the cancellation of a trip “for any reason” does not depend on the occurrence of a fortuitous event. Accordingly, there are two alternatives for providing CFAR benefits to travelers in New York.”

The New York DFS informed insurers that they must “make CFAR benefits generally available to consumers, without requiring the purchase of a standard insurance policy from the insurer. If CFAR benefits are sold to a consumer who is also purchasing a standard travel insurance policy, CFAR benefits must be reflected in a standalone contract that is separate from the insurance policy.”

Having resisted offering CFAR benefits as other states allowed it, New York DFS admitted in its Mar. 6 letter that “as the market has evolved, DFS appreciates that CFAR benefits have become a significant part of the travel insurance market.” It noted that, for example, the National Association of Insurance Commissioners’ Travel Insurance Model Act authorizes insurers to sell CFAR benefits, while recognizing that they are not insurance.

“Accordingly, we expect that insurers should be able to demonstrate that CFAR benefits are necessarily incidental to being able to provide a full array of consumer protections so long as those benefits are not conditioned on a fortuitous event, and are generally available and not dependent on the purchase of a standard insurance policy from the insurer.”

The DFS instructed travel agents that they or other non-insurers “may sell CFAR benefits so long as those benefits are not conditioned on a fortuitous event. We remind travel agents that they cannot provide travel insurance or require it to be written as a condition to issuance of the CFAR contract.”

In March 2019, Travel Market Report asked a New York DFS spokesman to explain the law that prevented the state from letting insurers offer CFAR coverage. They wrote: “Insurance is designed to provide protection against an unforeseen event that occurs by chance or accident over which an affected person has no control. ‘Cancel for any reason’ allows the purchaser to control the event that would lead to payment, which we deem not to be insurance.”

When asked last March whether the state has ever, or would consider allowing CFAR insurance, the spokesman declined to comment to Travel Market Report, saying the state does not discuss its regulatory deliberative process.

In the Mar. 6, 2020 letter, the DFS also reminded travel insurers and other related industry members that COVID-19 “may be a covered peril under a travel insurance policy. Pursuant to Insurance Law § 3452, trip cancellation/interruption insurance is authorized as a property-type of insurance, regardless of the underlying reason for the cancellation/interruption so long as it is fortuitous.

“Accordingly, authorized travel insurers may provide travel insurance that provides trip cancellation/interruption coverage if the insured’s trip is canceled or interrupted due to an epidemic or pandemic. A travel insurer can also provide coverage specific to COVID-19. In either case, the trigger for coverage must be stated clearly in the policy. Nothing in the New York Insurance Law or regulations promulgated thereunder requires a travel insurance policy to exclude coverage for an epidemic or pandemic.”