Travel Insurance Regulation and Enforcement Actions in the US - Likely Impact to Entire Travel Industry
As we have written in previous updates, the travel insurance industry is experiencing significant regulatory activity, including enforcement activity, which is culminating into Regulatory Settlement Agreements (RSAs) and the development of model legislation to provide clarification for the industry. Since our last update on this issue, multiple states have published RSAs with several carriers in the travel insurance industry. Additionally, development of a model law has progressed such that several states have either adopted or proposed legislation that will directly impact the way businesses involved in the distribution or sale of travel insurance/travel protection products, including cancellation waivers, can conduct business. The impact of both enforcement and legislative activity is not limited to insurance companies.
Businesses Affected by Travel Insurance Regulations and Enforcement
As discussed in more detail below, numerous non-insurance entities operating in the travel, tourism and cruise line industries will be impacted by these changes and should take note of required compliance. Impacted businesses may include, but are not limited to, the following:
- Cruise lines
- Common carriers such as airlines
- Tour operators
- Travel agencies
- Travel websites and aggregators
- Vacation rental companies
- Hotels and Resorts
- Travel Assistance companies
- Medical Tourism companies
Several states in the U.S. have either adopted legislation or are currently considering proposed legislation that will establish a regulatory framework for travel insurance (as defined in the legislation), along with related travel protection products and services. All entities selling, offering, or disseminating travel insurance, such as cruise lines, airlines, travel agencies, tour operators, and other distribution participants, are affected by the RSAs and by any adopted legislation. As mentioned in previous updates, Louisiana has already adopted a version of the Travel Insurance Model Act developed by the National Conference of Insurance Legislators (NCOIL), which became effective on January 1, 2018. Additionally, the state legislatures in both Maryland and Oklahoma have now proposed similar legislation. Areas impacted by this legislation include:
- Licensing and oversight of travel retailers, which offer and disseminate travel insurance on behalf of travel insurers.
- Development and sale of cancellation fee waivers – both Cancel for Any Reason (CFAR) and Cancel for Specified Reasons (CSAR).
- Marketing and sales of insurance coverage sold as a package with assistance services or cancellation fee waivers.
- Providing blanket insurance coverage included as part of a trip or travel package.
- Medical evacuation and repatriation of remains.
The proposed Maryland legislation would also impose premium tax on insurance policies sold to certain foreign nationals temporarily residing in the United States.
In addition to currently proposed state legislation, the National Association of Insurance Commissioners (NAIC) Travel Insurance Working Group is currently developing its own travel insurance model law, using the NCOIL model as a base.
Pending any legislative changes enacted by individual states, the impact of the RSAs will be felt by the entire travel, tourism and cruise line industries. Considering these developments, industry participants should work to review their travel insurance/travel protection programs, including their current licenses, and take proactive action to determine if effective compliance measures or implementation of corrective measures are required.
Frost Brown Todd’s Insurance Industry Group has significant experience with Travel Insurance and Travel Industry regulatory, marketing, and operational issues, including assisting non-insurance entities such as airlines, cruise lines, tour operators, travel agencies, travel assistance and medical evacuation companies with compliance programs in the U.S. and internationally, as well the development of new non-insurance products such as cancellation fee waivers, call center and administrator operations, together with necessary training, licensing or registration to sell or offer and disseminate travel insurance. We also offer effective licensing and call center operation compliance solutions through our Port Compliance Program, which is specifically tailored to the travel industry's unique requirements.
Additionally, Frost Brown Todd’s Insurance Industry Group has been actively engaged in NCOIL and the NAIC Travel Insurance Working Group’s drafting process for the development of the new NAIC travel insurance model law and state travel insurance legislation. If you have questions about how these rapid developments will impact your business, please feel free to contact Greg Mitchell or Donald Morgan with Frost Brown Todd’s Insurance Industry Group.