UK vs USA – The State of Regulation

Over the past several weeks there have been many articles that have appeared concerning an ongoing investigation in the UK of travel insurance. Specifically the travel insurance that is included in travel and tour packages. It seems that stand alone travel insurance is regulated in the UK by a government department called the Financial Services Authority (FSA) however, the travel insurance that has been included in travel and tour packages has been exempt from regulations. There seems to be a growing concern that coverages offered by these unregulated packages may not meet consumer needs or expectations and therefore the need for the investigation.

Normally I don’t comment on news for the UK because there are many differences in the USA market however, several business associates have asked about travel insurance regulations in the USA and whether or not there are current controls in place to offer some consumer safeguards.

The answer is YES, most travel insurance offered in the USA is regulated and it’s regulated on the State rather than Federal level. Generally travel insurance has to comply with the following laws/regulations:

  • the underwriting insurance company must be licensed with the State; and
  • the insurance agent who sells the policy must be licensed with the State and appointed by the insurance company; and
  • the travel insurance policy must meet or exceed State insurance policy standards and in many cases must be pre-approved by the State Insurance Department; and
  • the rates must be reasonable for the benefits provided.

The second point about agents having to be licensed includes travel agents. Almost every State requires travel agents to hold insurance licenses if they are to sell travel insurance and in most State there is a specific “limited lines” travel insurance license just for travel agents or other agents that specialize in selling travel insurance.

Even with this level or regulation you sometimes get an aberration. Last year I wrote about an unlicensed travel insurance company from Tennessee that was the brunt of several State Insurance department investigations. At last look the travel insurance company was out of business because the regulations worked. It took time but they did work and the unlicensed company was finally shut down.

So is travel insurance regulated in the USA? Yes. Will the investigation in the UK affect the USA? No. Do you have to research your travel insurance plan? Yes, even though travel insurance is regulated every once in awhile someone will try a scam. It’s best to rely on a travel insurance professional to do part of your research first.

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