Property and Casualty Insurance (C) Committee
Thursday, August 15, 2024
12:30 PM CDT
McCormick Place Convention Center—S102—Level 1
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Travel Insurance
Background
Last Updated: 12/13/2024
Issue: Travel insurance is a type of insurance for risk associated with traveling such as loss of luggage, trip cancellation and delays. The popularity of travel insurance is increasing. According to the U.S. Travel Insurance Association (UStiA) 2020-2022 market study, Americans spent nearly $4.27 billion on various types of travel insurance protection. In 2022 around 77 million people were protected and online direct-to-consumer distribution channels account for over half of total consumer spend and over 80% of the number of consumers insured.
Background: Travel insurance gives consumers peace of mind when booking a trip that they will be reimbursed for part of, or all their expenses should an undesirable event occur that prompts cancellation or interruption of the trip. Policies are generally good for U.S. and international travel and usually cost 5% to 10% of the total trip price. Rates vary based on the season, your origin location, your destination, age, and other factors.
The main types of travel insurance include:
- Trip Cancellation/Interruption/Delay insurance reimburses all pre-paid and non-refundable travel expenses if an individual is prevented from taking all or part of their trip. These policies may reimburse the traveler for part of the vacation should they become seriously ill or injured during the trip or if a flight is delayed, requiring an overnight stay in a hotel. According to UStiA 2022 market data this is the most popular type of travel insurance purchased and these policies account for 89% of travel protection products purchased
- Baggage Loss/Delay or personal effects insurance is considered secondary coverage and covers the traveler's lost, stolen, or damaged baggage and personal items. While consumers may have some coverage via homeowner's policies or credit card companies, baggage loss policies can offer additional protection for coverage gaps.
- Travel Medical insurance offers secondary health and accident insurance in case of illness or injury while traveling as most standard health insurance plans and Medicare likely will not provide coverage abroad. Additionally, a number of countries, including most of the E.U., may require proof of medical insurance in order to receive a visa.
- Medical Evacuation insurance covers costs related to medical emergency transport to licensed medical facilities. Most U.S. health insurance companies will not pay for repatriation or transport to the nearest appropriate medical facility when overseas.
- Cancel For Any Reason: Cancel for any reason (CFAR) coverage augments trip cancellation insurance by allowing the insured to cancel their trip and receive a partial refund (50%-75% of the total price) for any reason not covered in the original trip cancellation plan. CFARs offer more flexibility than trip cancellation insurance alone. Usually, certain criteria need to be met to qualify for coverage such as purchasing the policy within a specified time frame, insuring the entire full cost of the trip, and adhering to cancellation restrictions (CFARs typically only allow the traveler to cancel their trip 48 hours or more before the departure date). Because of the comprehensiveness and flexibility CFAR policies offer, they will add close to 50% to the total travel insurance cost. The more expensive the trip, the more a CFAR policy will cost out-of-pocket.
Policy Exclusions
As with any insurance policy, it is good practice to check not only what is included, but what conditions are excluded from the policy as well. Although every policy is different, some of the most common travel policy exclusions are:
- Pre-existing health conditions
- Pandemics
- Civil and political unrest at the traveler's destination
- Pregnancy and childbirth
- Coverage for those engaging in risky activities such as bungee jumping, backcountry skiing, snowboarding, etc.
Non-Insurance Coverage
Travel insurance products are frequently bundled together with non-insurance products and sold as a package. Even though products and services may be bundled together, only the insurance products have the oversight of state insurance departments. Two of the most common non-insurance travel products are cancellation fee waivers and travel assistance services. Cancellation fee waivers provide coverage for fees that may be incurred when cancelling travel plans. Travel assistance services provide things like translation assistance, referrals to medical services, and assistance with lost luggage or travel documentation.
Actions
Status: In November 2015, the U.S. Travel Insurance Association and the Tourism and Travel Industry Consumer Coalition raised concerns regarding lack of specificity and consistent application of regulation of the travel insurance industry to the Property and Casualty (C) Committee. This prompted the committee to appoint a Travel Insurance (C) Working Group in 2016 to consider development of a model law or guideline to establish appropriate regulatory standards for the travel and tourism insurance industry. During the year, the Working Group drafted the model law using the National Conference of Insurance Legislators (NCOIL) Travel Insurance Model Act as a starting point. This model law defines regulatory structure related to travel insurance and covers market regulation, premium tax, rate regulation, and enforcement. The model was adopted by the NAIC membership in December 2018. The US Travel Insurance Association reports that, as of May 2024, 36 states have adopted some version of the rule.
In 2019, the Market Conduct Examination Standards (D) Working Group added standards relating to travel insurance. A summary of these changes is available here.
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