Your Replies: New Agency Model Requires Different Biz Insurance

Last week in my monthly “Testing the Waters with Dori” column, I mused about a new type of agency model that is on the horizon. One that sees advisors bundling all the components of a trip into one package, charging above market price for it, and making the travel agency the “agent of record.”

As I learned from you, it’s a model that some advisors and agencies are already dabbling in, particularly if booking elements of a trip that don’t typically earn them commission – like restaurant reservations, sporting event reservations, or even some tours. For things like that, which the client pays the advisor for and then the advisor pays the supplier, they’re already the “agent of record” and therefore dipping their toes into this new model on a limited basis.

“Most agents do this and do not realize they are doing it at all,” said Suz Haire, of TravelAgentSuz, LL in an email responding to my column “A New Travel Agency Model?”

Haire, too, is already doing this with some of her clients, particularly with groups. And she has a warning for other advisors.

You need insurance that covers your business as a tour operator and not just a travel agency if you’re going to do business in this way, even only with some of your clients.

Here’s what she had to say:

So there is a complication that has the ability to arise when using this scenario: E&O and professional liability insurance that covers you as an agent does not cover you as a tour operator. When you package, you personally and effectively became the tour operator. I already do this with some providers.

Per my insurance company, this would not be covered under typical E&O. So I expanded my policy to cover myself and my agents as a tour operator – not just an agency. This was not cheap. You also need to make sure to cover cyber security as your risk gets higher in this area as well. Again, not overtly expensive but not cheap.

Agents often will look for ways to make more – but do not look at what the cost to that actually is. This is a situation where someone could make an error and is now out of business because their insurance company drops them after they did something that was not covered.

They also need to identify (if they do groups) if they are booking student groups or regular groups. If they book student groups – their Seller of Travel Licenses (in states like Florida that require them) must include a higher bond and be noted that they do student groups. While this has no bearing on using net, packaging, and so forth – this is one step many people forget to do when they start working with net and packaging – and all a sudden they are in trouble with the licensing. The fines here are high! And if they are using net and packaging, money is easier to be made with student groups than if you are using retail or prepackaged pricing.

— Suz Haire, owner, TravelAgentSuz, LLC