Over the past several years, there has been significant regulatory activity impacting the travel industry, including development of prospective legislation and enforcement activity. This activity, a combination of enforcement and development of model laws, has the potential to impact the way travel protection products and services are sold, distributed, and structured. Further, this impact may extend to products outside of “domestic retail” travel insurance products as well.
The National Association of Insurance Commissioners (NAIC) Market Actions Working Group (MAWG) has undertaken significant activity regarding the travel insurance industry, including scrutiny of issues for which there has been little or no regulatory guidance to assist industry participants in developing compliant business practices. However, despite the lack of regulatory guidance, MAWG scrutiny concerning these issues can indicate the position regulators will take regarding certain practices.
The best practice for all industry participants, including any travel industry participants that offer and disseminate travel insurance along with their travel products and services, is to act preemptively to implement effective compliance and defensive programs:
- For insurance industry participants, this includes ensuring proper oversight of distribution channels and product marketing.
- For those in the distribution channel that offer and disseminate travel insurance along with their travel products, as well as those engaged in providing assistance services, waivers, or any other travel-protection-related services, it is crucial to understand the regulatory requirements that apply, even where not primarily in the business of insurance.
In addition to MAWG activity, the NAIC Travel Insurance Working Group is currently working to develop a model law to regulate travel insurance. The Working Group’s efforts are based on the 2017 National Conference of Insurance Legislators (NCOIL) Travel Insurance Model Act.1 This model has the potential to require industry participants to implement wide-ranging changes to business processes. Further, these changes will not be limited to insurance carriers. All entities selling, offering, or disseminating travel insurance, such as cruise lines, airlines, travel agencies, tour operators, and other distribution participants, are likely to be affected.
Areas that may be impacted by ongoing regulatory activity, both enforcement and prospective legislation or regulations may include, but are not limited to the following:
- Marketing and advertising of travel protection plans that combine insurance policies with non-insurance assistance services or fee waivers (travel protection plans).
- Providing travel insurance through a group or blanket policy.
- Providing travel insurance through a trust.
- Medical evacuation and repatriation of remains.
- Contractual waivers.
- Conducting audits of entities selling travel insurance on a company’s behalf.
Two areas in particular may have a notable effect on the way the travel protection industry does business: (1) the marketing and sale of travel protection plans that combine insurance protection with non-insurance products and services, and (2) contractual waivers.
First, the marketing and sale of travel protection plans will likely be impacted by regulatory activity. Specifically, such activity has the potential to affect whether insurance and non-insurance can be sold for a single price, how prices of plan components need to be broken down and disclosed to the consumer during the purchase process, and what parts of these plans will be considered part of the insurance product and therefore must be included in a filing. Some changes in particular, such as not being able to sell a travel protection plan for a single price, would significantly impact the way these products are commonly sold throughout the industry, and potentially harm and confuse consumers by failing to ensure they receive the insurance and non-insurance protections necessary for travel in today’s world.
Second, the current regulatory activity may impact contractual waivers that offer a waiver of a contractual term for specified reasons. These waivers have previously provided for either specified reasons or for any reason, depending on the price and trip being purchased. However, some state legislators or regulators may consider contractual waivers for specified reasons to be insurance products.
In light of this regulatory activity, including both enforcement and prospective legislation, the need for effective compliance programs is greater than ever. Industry participants should work prospectively to develop and maintain effective compliance measures to reduce the risk of regulatory scrutiny, and the potential for administrative penalties or other fines.