Travel Insurance Laws: A ‘Patchwork’ and a Threat to Travel Agents

by Barbara Peterson / December 10, 2014

This is the second in a series on travel insurance

A coalition of ASTA and the U.S. Travel Insurance Association (USTia) will renew their push early in the new year for nationwide adoption of a model law to ease restrictions on sales of trip insurance, a development that would facilitate travel agents’ sale of this potentially lucrative add-on.

After a string of victories, the goal is to have all 50 states, plus the District of Columbia, agree to unified standards by the end of 2015, according to Eben Peck, ASTA’s vice president for government affairs.

“That’s the promised land,” said Peck, adding that nothing short of unanimity across the country will give agents the full benefits of the new regime.

Until that point, even agents based in states that have passed the law still have to deal with a welter of confusing and conflicting regulations, which can limit their ability to sell insurance policies across state lines, for example.

And while a total of 31 states are onboard (see sidebar), legislatures in a number of key states have yet to act, including New York, Massachusetts, Pennsylvania, and, indeed, much of the Northeast.

‘No rhyme or reason’
“It’s a patchwork,” Peck said. “There is no rhyme or reason as to which states have it and which states don’t.”

Illinois is likely to pass the bill soon and as more states adopt it, the laggards will be notable by their absence, Peck added.

The model law—known as the Limited Lines Travel Insurance Model Act—would clear the way for more agents to offer clients insurance by removing the requirement that agents who sell it must be licensed in the state where the policy is sold.

Essentially, the law would allow agents to perform basic tasks without becoming full-fledged insurance sales agents.

They could provide information, process applications and collect premiums for trip cancellation and other travel related policies. They would thus be spared the burden and cost of having to go through the licensing process.

No uniform approach
Asked whether some states are holding out due to specific objections, Peck said any delay is more likely due to the difficulty of grabbing the attention of state lawmakers.

In the Northeast, an additional complication was that insurance commissioners were overwhelmed in the aftermath of superstorm Sandy in 2012.

Jack Zemp, a member of USTIA’s law and regulation committee and vice president and deputy general counsel for Allianz Global Assistance, acknowledged that “it is rare for all states to adopt a uniform approach on any law.”

But he said that he’s optimistic about the outcome, pointing out that the model law was developed in consultation with the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL).

Advice for agents
Although ASTA, USTiA and NAIC are working together to get all states “to shift the licensing burden away from travel companies and place it on the insurance companies and providers themselves,” business must go on, said Jason Schreier, CEO of APRIL-USA. The company is the newly-launched U.S. division of APRIL Travel Protection.

Each state now has the authority to act against unlicensed travel insurance sellers, added Scheier, who is also a member of USTiA’s law and regulation committee.

For agents that can mean fines, reimbursement of insurance premiums, and the loss of ability to sell insurance to clients in their own states, he said.

“It’s imperative that travel agencies and suppliers speak with a travel insurance expert to ensure that they’re observing best practices relative to licensing while this state-to-state reform is still taking shape,” Schreier advised.

Lobbying funds
Meanwhile, ASTA, USTiA and individual travel insurance companies have provided more than $1.5 million so far towards the lobbying effort.

“Based on our experience so far, we believe the standardized approach will be adopted in nearly all states,” said Zemp.

Still, there will likely still be some minor variations among the states, such as Washington’s requirement that agencies, not just individual agents, register with the insurance commission.

Approved to sell insurance
ASTA doesn’t have statistics on how many travel agencies are in fact licensed, said Peck.

However, one major insurer, AIG Travel, estimated that 8,000 agents are approved to sell its policies.

And even agents who are licensed are looking forward to the day when they’ll be free to sell policies to clients without worrying about running afoul of obscure rules and regulations.

“It is a huge step forward for travel agents,” said Rick Ardis, immediate past president of ASTA’s New Jersey chapter and owner of Ardis Travel in East Rutherford, N.J.

Ardis’ home state of New Jersey has yet to pass the model law.

Ardis is licensed to sell trip insurance but even so, it can be complicated.

For example, if Ardis is selling a policy to a group that includes some members who reside in states that haven’t enacted the model law, he must often navigate a thicket of differing rules.

“When my customers in New York want to buy insurance, they either have to call the (insurance) company on their own or I have to refer them to another agent authorized to sell it there,” he said.

“It’ll greatly benefit everyone once we have that single standard that allows us to sell this product under one license.”