Insurers were caught off guard last week when Sen. Ed Markey
(D-Mass.) issued a report on travel insurance saying that policies sold by
airlines and OTAs are being "aggressively pushed onto customers" and
fail "to provide promised coverage."
Markey's report further found that "the airline
industry is exploiting travel insurance as an easy revenue generator."
The report, titled "Flyer Beware: Is Travel Insurance
Worth It?", is based on the senator's review of nine airlines (Alaska,
American, Delta, Frontier, JetBlue, Southwest, Spirit, Sun Country and United)
as well as several OTAs, including CheapOair, CheapTickets, Expedia, Hotwire,
Orbitz, Priceline and Travelocity. It specifically calls out AIG Travel Guard
and Allianz Global Assistance, which offer insurance on 12 of those OTAs' and
airlines' websites.
A news release accompanying the report stated, "Because
none of the airlines contacted by Sen. Markey's office was willing to disclose
details of its financial relationships with AIG or Allianz, [he] also is
querying the companies to learn more about the financial arrangements they have
with the airlines and online travel agencies."
Letters were sent on Aug. 21, the same day the report was
issued, to Jeff Rutledge and Mike Nelson, CEOs of AIG and Allianz,
respectively. They ask a number of questions, including whether the insurers
have contracts with airlines and OTAs and what their role is in marketing
insurance. The letters also seek data on policies sold, premiums collected,
claims made and more for the period of 2007 to 2017.
Travel insurers respond
Daniel Durazo, director of communications for Allianz,
confirmed on Aug. 21 that he had received the letter. Allianz will evaluate it
and decide how to respond, he said.
Allianz vice president of sales Richard Aquino said the
insurer was not contacted during the investigation that resulted in the report.
He also said he believes Allianz's products provide benefits to travelers.
"It would have been nice if the senator's office would
have contacted us, because I see a huge benefit in our product portfolios,"
Aquino said. "If it wasn't so successful, then I don't think that we would
be growing at the rate that we are. Even with the airlines, we have artificial
intelligence that actually works with the system that looks at the traveler and
puts the best product in front of the traveler. So I really think it's a value-add
to the journey."
Like Allianz, the U.S. Travel Insurance Association (USTIA)
said the senator's office did not contact its officials.
"USTIA is not aware of Sen. Markey or his staff having
contacted us or anyone in the travel insurance industry while they were
compiling this report," the association said in a statement. "As
such, we found that the report did not match [the] industry's experience with
its customers, and we would be glad to share that experience with the senator."
The group said it recommends that consumers fully understand
insurance before purchasing it.
"As with homeowners and auto insurance, travel
insurance has some limits and conditions, and therefore, travelers should
thoroughly review the terms and conditions before -- and after -- purchase,"
the association said. "The purchase of travel insurance is voluntary."
For its part, AIG released a statement saying, "Each
year, travel insurance plans provide millions of travelers with protection for
their financial investment and valuable travel assistance services. We ensure
that a thorough description of coverage is available to our policy holders at
all times."
Markey's report found that airline and OTA websites "offer
only bare-bones travel insurance plans with little coverage and a long list of
exclusions that leave customers stranded," and they "commonly
overstate" the flexibility of the policies. The details, the report contends,
are buried in fine print.
Insurance is often encouraged, too, by sellers requiring
consumers to either buy or decline insurance before enabling the purchase of
airline tickets, according to the report.
"Consumers are pressured to buy plans that promise
extensive or even total coverage but in reality offer very little, leaving them
without the security they thought they bought and oftentimes without their
money," Markey said in a statement.
With regard to a promise of extensive or total coverage, the
senator's report calls out five OTAs that have named their international travel
insurance a Total Protection Plan. The plan "in fact provides limited
coverage," the report states, pointing to coverage limitations applied to
trip cancellation or interruption or a plan promising lost-baggage
reimbursement that requires a consumer to click to the policy to see that there
are monetary limits to reimbursements.
As a result of the report, the senator made a number of
suggestions: Travelers should weigh the risks they want insured and find a plan
that fits their needs, read the policy's terms, evaluate other insurance
options using a comparison site and save receipts and cancellation notices.
Airlines "should return to charging fair prices for
services expected," the report states, enabling travelers to cancel or
change flights without excessive fees. Markey also said airlines should treat
insurance like other add-ons and not require travelers to purchase or
specifically have to decline insurance, and airlines and OTAs should be more
transparent about travel insurance policy sales and their relationships with
travel insurance companies.
The senator said insurance companies "should make
information related to travel insurance claims public."