Lawmaker report questions value of US airline travel insurance
A new congressional report on the US travel insurance industry accuses airlines and online travel agencies (OTAs) of pressuring customers to purchase travel insurance that offers insufficient coverage.
The Aug. 21 report by Sen. Edward Markey (D-Massachusetts) followed an investigation by Markey’s staff that reviewed the websites of nine major US airlines and seven popular OTAs. The investigation found that almost all of the companies were engaged in what it called “questionable” travel insurance marketing practices for policies that offer “minimum coverage and often erect hurdles to the payment of claims.”
“The only thing skimpier than airplane legroom are these travel insurance plans,” Markey said. “Consumers are pressured to buy plans that promise extensive or even total coverage, but in reality offer very little, leaving them without the security they thought they bought and oftentimes without their money.”
A spokeswoman for Airlines for America, in an emailed response to a query, declined to address the specifics of the travel insurance options, but said that: “There are a variety of travel insurance options in the marketplace enabling consumers to determine what, if any, coverage best meets their individual needs.”
Megan Cruz, executive director of the US Travel Insurance Association, said in a statement, “Travel insurers take seriously their obligations to make terms and conditions clear and easily accessible, and our industry members speak to thousands of customers daily to answer their questions and address their concerns.”
“UStiA is not aware of Sen. Markey or his staff having contacted anyone in the travel insurance industry while they were compiling this report,” Cruz added.
The report charges that airline and OTA websites offer only “bare-bones” insurance plans with “little coverage and a long list of exclusions that leave customers stranded.” For example, the “Total Protection Plan” offered by five of the OTAs, including Expedia and Travelocity, does not reimburse customers for travel arrangements canceled by an airline or tour operator, or for a change of plans by the insured or their family.
Of the 15 airlines and companies offering travel insurance on their websites, 12 contract the sale of policies to just two providers, AIG Travel Guard and Allianz Global Assistance. On Aug. 21, Sen. Markey sent the two companies a letter requesting information related to the financial arrangements between the airlines and OTAs and AIG and Allianz. Airlines and OTAs earn an undisclosed fee on every insurance policy sold.
The report also alleged that airlines had “manufactured” a need for travel insurance, by excessively raising ticket cancellation and change fees. Travelers spent $2.8 billion on travel insurance in 2016, which is 2.5 times more than they spent in 2004, according to the report.
Last year, Markey, along with Sen. Richard Blumenthal (D-Connecticut) introduced the Forbidding Airlines from Imposing Ridiculous (FAIR) Fees Act, which would prohibit airlines from imposing cancellation, change and bag fees that are not “reasonable and proportional to the costs of the service provided.” That provision was included in the Senate’s version of the upcoming bill to reauthorize the FAA, although Teal Group analyst Richard Aboulafia expects it to ultimately be watered down or significantly weakened if it makes it into the final version of the legislation.
The investigation collected information on travel insurance marketing and sales practices from nine major US airlines: Alaska Airlines, American Airlines, Delta Air Lines, Frontier, JetBlue Airways, Southwest Airlines, Spirit Airlines, Sun Country and United Airlines. It also evaluated information from seven popular OTAs including CheapOair, Cheaptickets, Expedia, Hotwire, Orbitz, Priceline and Travelocity.
Ben Goldstein, Ben.Goldstein@aviationweek.com