On 9/23/2013 the National Consumers League (NCL) published a report concerning airline cancellation and change fees and the marketing of travel insurance by the airlines and online travel agents. I’m not an expert on airline cancellation and change fees but I’m very knowledgeable concerning travel insurance and I spotted several errors in their report which are building blocks for their recommendations.
Here are the most serious errors in their report:
1. the article states that “Trip cancellation/interruption policies, the type most often marketed to consumers by airlines and travel Web sites, accounted for 94% of travel insurance premiums in 2012”. No doubt this information was found at USTiA’s web site that states, “policies that incorporated trip cancellation/interruption benefits continued to be the most popular overall, accounting for over 94% of total travel insurance premiums”.
Their statement makes it appear that 94% of all travel insurance sales are for trip cancellation/interruption coverage which is not true. What the report actually says is the policies that contain trip cancellation/interruption coverage amount to 94% of all policies sold. Policies that contain trip cancellation/interruption coverage also contain other travel related coverages, such as travel medical, medical evacuation, baggage, etc. And even though they contain trip cancellation/interruption coverage most plans are available without those trip investment coverages by entering a zero value for the travelers trip cost.
2. They also use of the phrase, “carte blanche” which implies that the insurance company can subjectively deny claims which in itself is misleading. Travel insurance is a contract between the traveler and insurance company and like all contracts they have terms and conditions that must be applied objectively and without discrimination. Subjectively denying claims is an illegal practice and violates “fair claim” laws.
3. Their statement that only 64 travel insurance complaints reported by the state insurance commissions to the National Association of Insurance Commissioners (NAIC) from 2010 to the current is misleading. First it is factually incorrect since the report that they refer to shows 66 complaints closed but also it does not allow for the possibility that the NAIC’s report relies on data that is submitted to them by their member states and that most states don’t categorize travel insurance into one specific category or sub-category but rather into several different categories that might include, Accident & Health and Inland Marine. Travel insurance is not a category that is uniformly used by most states.
4. Their first recommendation completely ignores the fact most states currently have laws governing insurance advertisements which includes prohibitions against using small type and misleading ads. Their recommendation suggests that the Federal Government should regulate something that is already regulated by the States.
Overall it’s an interesting article and some of their suggestions are on point but misleading and factual errors cloud the issues.