According to a recent article in Forbes, “travel protection” was originally offered by cruise lines and other travel organizations as self-funded trip cancellation protection that paid the cancellation penalties if a client canceled a trip. It was sold through travel advisors and the travel organization’s own telephone reps for a modest price.
The idea was simple: If a cruise line booked a stateroom for a client who later wanted to cancel, they could cancel and receive a full cash refund or credit—if they had purchased the Trip Protection Option. This was a low risk to the cruise line, since the stateroom could be resold to another passenger. It was an easy sell for travel advisors and paid a low commission.
If a client wants to purchase a wider range of safeguards, such as coverage for medical conditions or injuries, these packages are more complex and have to be sold through state-licensed insurance brokers. Because these risks are highly dependent on the clients’ ages, the policies can be very costly for elderly clients.
In most states, travel advisors are, theoretically, only permitted to make clients “aware” of travel insurance products. Buyers had to use a licensed broker—usually on an “800” number—to explain the policy, calculate the price, and complete the sale. It is up to the travel advisor to convince the client of the need for this product and suggest which company they should call.
Recommendations generate a handsome commission, often in the 20-28 percent range. Since the cost of the policy for an elderly client can easily exceed 10 percent of the cruise fare, the sale of travel insurance by steering clients to insurance companies has become an essential part of many travel advisors’ compensation.
COVID exaggerates these trends. Only the insurance companies have the cash reserves to permit them to view COVID-19 as “just another medical condition.” This caused many travel advisors to recommend that their clients buy travel insurance rather than the travel protection offered by travel companies. The demand for travel insurance that doesn’t discriminate against COVID increased the demand for these products.
But the cruise lines and travel companies don’t want their clients to have the difficult choice of choosing between their own travel protection and the insurance companies that covers COVID illnesses and quarantines. The cruise lines and travel organizations have subcontracted with insurance companies for additional protections they could build into their travel protection that include medical problems, accidents, medical evacuations, quarantines, trip delays, and luggage insurance. The major remaining differences:
- Travel protection does not usually increase premiums for older clients.
- It does not provide coverage for the financial insolvency of the travel provider.
- It reduces the commissions paid to the travel advisor to about 10 percent.
- It can be sold by travel advisors, cruise lines, and travel companies without state licensing.
Some travel protection products also include CFAR (Cancel for Any Reason) coverage. This not only protects guests if they must cancel, but it also protects travel companies and advisors when clients cancel. Unfortunately, CFAR can vary widely in the percentage of returned payments, whether the proceeds are paid in cash or credits against future vacations and the reasons that CFAR isn’t paid out.
Unfortunately, whether it be travel protection or travel insurance, the details are often contained in 50-plus pages of fine print that will make your eyes glaze over—if you’re not a lawyer. Even licensed travel insurance brokers seldom go into the details of insurance policies that can vary state-by-state, and few travel advisors or 800-line reps have the background to explain travel protection provisions adequately.
This leaves buyers in a quandary. Do they buy either product, despite not fully understanding them; do they follow their travel advisor’s recommendation; or do they forgo purchasing both kinds of products? The problem is that they need a disinterested party that doesn’t have a financial stake in their decision and is highly trained.
Right now, this kind of person doesn’t exist. Perhaps it will be available via AI software with enough artificial intelligence to help buyers with these decisions for a small fee, or by a new breed of insurance broker that is entirely fee-paid and up to date on both travel protection and travel insurance products.
The need is apparent. Who will step into the breach and fill it? Until someone does, the risk is much smaller if you buy either product in the 10 or 15-day window that determines whether your coverage will also contain a waiver for pre-existing health conditions. If you’re a travel advisor and don’t understand pre-existing condition waivers, it’s a sign that you need additional training in these matters.
Dr. Steve Frankel and his wife have cruised on most of the Seabourn, Silversea, Crystal, Azamara, Oceania, Regent, and Windstar ships. 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 steve@cruisesandcameras.com.
