In 30 years of involvement with the travel industry, I thought travel insurance was one product on which I could always count. My awakening occurred last year when one of my clients and I canceled a repositioning cruise from Japan to Alaska by way of Siberia.
Although Japan was closed entirely to cruisers, and the CDC said visiting Japan was unsafe, the cruise line wouldn’t officially cancel the cruise. This enabled them to defer providing refunds and permitted them to keep the $200 penalty guests had to pay if they canceled the cruise themselves. The $200 penalty caused our insurance company (one of the leading travel insurers sold by travel advisors) to deny our request to “roll” our insurance payments to a future cruise. The cruise line eventually returned our deposit, less the $200 fee, but the insurance company was adamant about keeping our entire deposits.
The insurance company representative argued that the $200 penalty exposed their firm to future claims I might make. I replied that neither my client nor I sought a refund on the insurance. I even said I would waive my rights to make future claims.
Everyone on this cruise who had bought insurance through this company and canceled the voyage had been charged the $200 fee. All those cruisers were being ruled ineligible for a voucher towards a future cruise. For an elderly couple who fully insured the entire cruise when making the booking, they could have been out $2,500 or more. Luckily, per my usual practice, I had only insured the amount of the deposit and airfare I had paid when making the initial reservation. In my case, this was $782, which should have been credited towards future insurance.
Before the pandemic, this would have happened automatically without fuss. As a VP from a competing insurance company said when asked about this, “We never want to take a client’s money without delivering something of value.” However, other companies became obsessed with stemming cash outflows during the last two years, which led to missteps that violated this vital doctrine.
Before COVID-19, all the travel insurance companies that marketed through travel advisors could be counted on to pay off claims and roll insurance purchases from one vacation to another. Their reputation, and the 25% commissions they paid for very little work, caused travel advisers to turn a blind eye to faults in the system.
The first awakening came when some insurance companies arbitrarily stonewalled claims or insisted on settling them with vouchers instead of cash. Because travel insurance is governed at the state level, client appeals are seldom effective. “Read the entire contract,” some reps say, disregarding that it may be 75 pages of legalese and different for clients in some states. This leaves the travel advisor on the hook, if any fine print is overlooked.
So, what are travel agents to do, especially when some can make much more on an hourly basis by “referring” clients to insurance agents that do the actual “selling” over the phone and pay commissions to the “referring” travel advisors?
Consider a couple in their 70’s who book a 15-day cruise on Holland-America. If you spend 4-hours selecting and planning the cruise and making the bookings, the $8000 cruise fare results in a net commission of about $1000, which works out to about $125 an hour. The insurance is likely to cost about $800, but suggesting a company and helping clients fill in the questions on the insurance applications will require about an hour if you’re recommending the company you usually use. The $800 policy might pay a 25% commission, which results in you being paid about $200 for an hour’s work.
This is the picture the insurance companies’ representatives will paint, but they won’t tell you that clients who feel they’ve been dealt with unfairly, or have claims denied, will be much less likely to return to you for another booking. They trusted you in going with the high-commission vendors you recommended and, if something goes sideways, you may be the one who is blamed.
This entire “referral system” needs to be rethought. All the travel consortia—such as Signature, Virtuoso, and Ensemble—need to use licensed insurance agents to negotiate with the insurance agencies and smooth out problems, ideally before they affect clients. These “licensed consortia representatives,” or their counterparts in large travel agencies such as Frosch or Travel Store, would recommend specific insurance products to their members and have the clout to negotiate with the insurance agencies on behalf of the entire consortia when things go wrong.
Another strategy is for travel advisors to rethink their practice of referring most of their insurance business to the insurance companies paying large commissions. Until problems can be resolved more equitably, advisors might be better off recommending their clients go with the cruise lines’ insurance. Some may be tailored products of the same high-commission insurance companies, but sold to cruise line clients with just a 10% commission. Also, the premiums on these insurance products usually don’t increase with the client’s age, which results in huge savings when the clients are seniors.
Many cruise line insurance products haven’t had as complete coverage of the high-commission products until recently. But this is changing. Many shipboard insurance products are now at least as good as the high-commission products in covering conditions relating to COVID, especially medical care, quarantines, and basic emergency evacuation costs. The high-price products were great when they offered clients better coverage than the shipboard plans, but this is often no longer true.
I booked the same couple, and us, on an October 2022 Fall Foliage Cruise from New York City to Montreal. We’re traveling on Seabourn, which had canceled an Australian cruise for us earlier in the pandemic before anyone thought that the early COVID problems wouldn’t be resolved in six months.
Seabourn gave us an immediate refund of the total fare and facilitated refunds from the air carrier and the travel insurance company we had used. But this time we’ve taken the Seabourn Shield insurance, since the coverage is virtually the same; but it’s not much more than half the cost.
Another alternative that is worth considering may be to combine a reasonably priced shipboard insurance plan with a specialty insurance product paying high commissions for those clients who need them.
For instance, Medjet Assist enjoys a terrific reputation for medical evacuation insurance, even if the total cost for getting you to the hospital of your choice is more than a million dollars. The price for an annual policy is $295 if you’re under 75, and $399 if you’re 75-85. Short-term medical evacuation coverage is also available at a fraction of the cost; absolutely a no-brainer for seniors visiting Antarctica or Africa this year, or for anyone who enjoys international vacations several times a year.
For as low as $149 more, you can add annual Medjet Horizon coverage to the policy that includes 24/7 travel security and evacuation services for the following hazards: “Political threat, terrorism, natural disasters, pandemic, violent crime, kidnap for ransom, disappearance, wrongful detention, violent crimes, or blackmail & extortion.”
While I don’t need this now for anywhere I want to travel; some clients may welcome this suggestion.
Dr. Steve Frankel and his wife have cruised on most of the Seabourn, Silversea, Crystal, Azamara, Oceania, Regent, and Windstar ships. He writes a weekly column, Point-to-Point, for Travel Research Online (TRO) that’s read by more than 80,000 travel advisors and industry leaders. Steve is the founder of Cruises & Cameras Travel Services, LLC. He has been recognized as a “2021 Top Travel Specialist” by Conde Nast Traveler magazine and a “Travel Expert Select “by the Signature Travel Network. His specialties are luxury small-ship cruises and COVID-19 safety measures, and has a doctorate in Educational Research with minors in Marketing and Quantitative Business Analysis. He’s also earned a Certificate in Epidemiology from Johns Hopkins University. Previously, he managed qualitative and quantitative research in the private & public sectors. He’s a member of the Los Angeles Press Club, and has written 13 books and hundreds of articles. His email address is firstname.lastname@example.org.