The perfect storm // © 2011 Andrejs Pidjass
Insurance from a TA's perspective
For the travel industry, the past year or so has been one of the most challenging and distressing in memory. The SARS and H1N1 outbreaks seem to pale in comparison.
The disruption began with the eruption of the volcano in Iceland that sent an ash plume across much of Western Europe grounding flights. Not much later, there were a series of terrible winter storms that battered much of the country with record snow and ice, once again forcing airports to shut down and thousands of flights to be canceled. Then, political unrest and violent uprisings broke out across North Africa and the Middle East, and the region's tourism industry -- vital to its economy -- came to a halt. At the same time, halfway around the world, Christchurch, New Zealand, was wracked by a devastating earthquake.
Finally, just as it felt as though crisis-weary agents had all they could handle, a terrible series of natural and manmade disasters hit Japan -- a 9.0 magnitude earthquake, a tsunami of record proportions and a nuclear disaster.
"This succession of horrible events made us ask, 'What else could possibly happen to trip up travel plans for the American public,'" said Carol Mueller, vice president at Travel Guard in Stevens Point, Wis.
The company's 24-hour call center saw a 20 percent increase in calls during the first few days following the Japan disaster. That was no record, though. When air space was closed because of the Iceland volcano eruption, calls spiked some 200 percent.
Still, according to Travel Guard, headline-grabbing events are not the most likely to ruin vacation plans. More common problems are usually the culprit.
"The number-one type of claim across the board involves the need to cancel a trip or a cruise as a result of some incident at home," said Mueller. "The customer becomes ill, someone in the family has a serious accident or becomes sick, and that deposit is now at risk -- unless the client is covered for trip cancellation for such reasons."Investment Protection
While travel insurance may not have been considered particularly important in the past, it has become a must-have component of any trip.
"Travel insurance is a smart investment for anyone taking an expensive prepaid vacation for which they would lose the cost of their trip if they needed to cancel due to sickness, loss of a job, hurricane or other disaster," said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the Insurance Information Institute. "It also provides important financial protection if the tour operator goes bankrupt or if a traveler gets injured while on vacation."
Mueller points out that it is important for a travel agent to sit down with the client, discuss his or her concerns and explain what could happen to impact the trip at the time a trip is booked. What the public may not realize is that what insurers call "state of mind" is not a reason for a consumer to cancel a trip and then seek reimbursement for advance payments or deposits.
State of mind would mean, for example, that the traveler decides at the last minute to cancel because he or she has some general concerns -- that the client is worried about the possibility of being on a cruise during the hurricane season, for example, or prefers to make the trip at some future, more convenient date. Such reasons are not covered unless the policy specifically has a "for any reason" clause.
Despite the obvious value of being protected in the event of travel woes, the number of travelers taking out insurance is relatively low. Industry studies show that no more than 25 to 30 percent of American travelers take out insurance, up from less than 10 percent prior to Sept. 11.
The cost of travel insurance involves not only the cost of the tour and the number of contingencies covered but also the age of the traveler. In general, travel insurance costs 5 to 7 percent of the total trip cost. Travel Guard offers four levels of coverage ranging from Basic through Silver, Gold and Platinum. Gold is actually the best seller, Mueller points out. All Travel Guard's products are commissionable with 35 percent paid on Platinum and 20 percent for the other categories.
One of the insurance sales tools that Travel Guard offers agents to help them sell is a computer calculation program called ezTIPS. Provided free, it eliminates the need to make manual calculations. For example, as an agent enters the various options to a basic policy desired by the client, the cost is automatically recalculated. If the client changes his or her mind, the agent "unselects" the specified feature and, instantly, the revised quote is provided.
In the view of Access America of Richmond, Va., the disturbing series of natural and manmade disasters has had a dual effect on the traveling public.
"Disasters have greatly increased the interest in travel insurance among potential travelers, and they have demonstrated the value of travel insurance to customers who have been affected by these situations," said Brad Gray, retail channel management director for Access America.
Still, while news reports graphically recount stories of helpless travelers stranded overseas as a result of violent street demonstrations or trapped in U.S. airports by storms, protection against such events is not the main reason clients are interested in insurance.
"Our experience shows that 'cancelation coverage' is the number-one reason," said Gray, adding that, in his opinion, Access America's policy list of "covered reasons" for trip cancellation is "the most comprehensive in the travel insurance industry."
Access America is a brand of Mondial Assistance, an international travel insurance and assistance company with more than 10,000 employees in 28 countries. Which, according to Gray, means that Access America can provide support to its customers.
In terms of products, Access America offers Basic, Classic and Deluxe policies with Classic as its best selling category.Selling Insurance
Many agents may recommend that a client purchase travel insurance, but it's often as an after-thought. That's not the way it is with Virtuoso travel advisors. The upscale network is very proactive in promoting and training its retail travel advisors to sell travel insurance, according to Jim Osborne, vice president of air and specialty products at Virtuoso.
Virtuoso mainly uses two preferred insurance providers -- Travelex Insurance Services of Omaha, Neb., and Access America. The Virtuoso network currently has more than 5,000 advisors involving 250 agencies in the U.S. and Canada.
"For a client who is making an investment of perhaps $5,000, $10,000 or even $20,000 in a trip or cruise, having insurance just makes good sense," said Osborne.
He points out, too, that, not only is the customer protected against unforeseeable circumstances but, if that customer isn't insured, he or she might file a claim against the agency if things go wrong.
"The agent must be protected, too," he said.
Osborne noted, however, that even the most comprehensive policy doesn't cover every possible contingency. There are exclusions if the cancellations or other problems arise due to "civil unrest" which is, for example, how the crisis in North Africa and the Middle East would be categorized. However, travel problems because of the earthquake and tsunami in Japan would likely be covered but only if the policy was in effect before the disasters struck. Most carriers sent out advisories that policies purchased on or after March 11 will not cover losses related to those events.
For these reasons, Virtuoso recommends the relatively new "cancel for any reason" policy. While it's more expensive and doesn't actually cover every conceivable cancellation reason, it generally will reimburse the traveler for up to 80 percent of the cost of the trip even if they simply don't want to go. There doesn't have to be a reason.
Quite separate from the conventional trip insurance coverage are policies related to a specific carrier, most commonly an airline, tour operator or cruise line.
In the cruise industry, Carnival Cruise Lines offers coverage that it believes to be "one of the most comprehensive travel insurance plans available in the cruise industry," according to Vance Gulliksen, public relations manager, for Carnival Cruise Lines.
The line's Cruise Vacation Protection Plan introduced the "cancel for any reason" enhancement at the beginning of the year. Passengers will be able to cancel their cruise -- regardless of the reason -- and receive a future cruise credit equal to 75 percent of cancellation charges, provided that they notify Carnival prior to the ship's departure. Those who cancel for a covered reason will receive 100 percent cash reimbursement.
Carnival's plan includes coverage for trip cancellation, trip interruption, trip delay, emergency medical evacuation, medical emergencies, baggage loss and baggage delay, severe weather watch/warning protection, as well as job-loss protection.
Prices begin at $49 per person and vary by cruise cost. Guests must purchase the plan no later than the final payment date for the cruise to be eligible for the "cancel for any reason" benefit. Carnival pays agents a 10 percent administrative fee on each policy sold.
For U.S. guests, Silversea offers an optional travel protection plan called Silversea GuestCare. It includes reimbursement for the full cruise vacation cost in the event of trip cancelation or the value of the unused portion of a trip, trip-delay protection, baggage loss or delayed protection and, among other features, reimbursement for accident or sickness medical expenses and emergency evacuation.
Cost of GuestCare coverage is 10 percent of the cruise fare or, for World Cruises or two or more segments of such a voyage, 10.5 percent. Commission to travel agents is 5 percent.
Lindblad Expeditions recommends and offers a policy through Trip Mate Insurance that provides medical evacuation, medical insurance and trip cancellation insurance. Available to U.S. and Canadian residents only, this optional coverage is calculated at 8.75 percent of the cabin fare and is commissionable to travel agents at 10 percent.
These features are particularly important says Jacinta McEvoy of Lindblad Expeditions since "our expeditions often operate in remote areas of the world. Evacuation can be very expensive if someone has a medical emergency onboard."
"Insurance has always been and continues to be, a significant component of the agent's product mix," said Jason Coleman, travel agent and president of the Southern California chapter of ASTA.
Coleman adds, however, that insurance continues to increase as a percentage of overall agency sales.
"ASTA recently released results of a study that compared sales in the first half of 2010 to the first half of 2009," he said. "Forty-four percent of agent respondents claimed their sales of insurance had increased year over year. What's even more significant is that percentage was larger than other segments including car rental, air and cruise."
All the same, Coleman noted that, unfortunately, "many travelers were caught off guard with the recent world and weather-related events. But those with travel insurance had a safety net."
"We all know that the unexpected can happen at any time," Coleman said, "but the sheer number of travel challenges we'íve faced in the last year make travel insurance sales much easier to close."