Mark Pestronk
Q: Our agency sells travel insurance. We have no license to sell it, but the insurance company we use tells us that neither our company nor our staff needs one. Is that correct? The insurance company also tells us that we cannot answer questions about the coverages in the policy. Is that really true, and if so, how can we sell policies if we can't answer questions?
A: All states except Hawaii and New York have adopted a version of the Travel Insurance Model Act, which was approved by the National Association of Insurance Commissioners and endorsed by ASTA.
Under the act, retail travel agencies in the state can sell travel insurance to consumers in the state (and other states that have enacted the act) without an insurance license, as long as they meet certain conditions.
The chief condition is that the advisor must sell under the supervision of a state-licensed travel insurance agency or broker, both of which are known as "producers" under the act. Producers are responsible for training travel agency personnel and for violations of the insurance laws by travel agencies, which are known as "travel retailers."
Other conditions for exemption include:
• Travel retailers may only "offer and disseminate" insurance; they can't bind the insurance company like a producer can. Instead, they can take a complete application and forward it to the producer for decision.
• Each employee and authorized representative of the travel retailer whose duties include offering and disseminating travel insurance must undergo training about how to instruct clients on the types of insurance offered, ethical sales practices and required disclosures to prospective customers.
• Travel retailers may describe a policy but not "evaluate or interpret the technical terms, benefits and conditions" of a policy; "evaluate or provide advice concerning a prospective purchaser's existing insurance coverage"; or "hold himself or itself out as an insurance expert." In other words, other than giving out materials and explaining what they are, you can't answer clients' questions about the policy; you have to refer them to the producer.
Incidentally, in most states where travel retailers are exempt from licensing, their employees and "authorized representatives" are also exempt. The quoted term probably includes independent contractors of travel retailers, although each state can interpret the law differently.
I realize that most travel agencies already offer travel insurance under the act and are at least somewhat familiar with these rules. However, there are thousands of others, including new entrants, who know nothing about the do's and don'ts of selling travel insurance.
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Follow-up: After this column went to press, the U.S. Travel Insurance Association wrote me to say that it offers "centralized training ... designed to make it easy for advisors to easily get connected to the travel insurance producers they use for their customers."
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Correction: In my April 1 column "Truth in advertising coming to travel," about the new California "junk fee" law that requires sellers to disclose all prices and fees, I wrote that the law "does not require a total" in an ad or a quote as long as you include all the fees other than taxes. However, a Q&A published by California's attorney general states that the price must be the "total price" other than taxes. So you can't just say, "The price is $300 (plus a $35 resort fee)" but you can say, "The price is $335 (including a $35 resort fee)."