How the COVID-19 Pandemic Has Changed the World of Travel Insurance

Jul 12, 2020

If you Google the term “travel insurance” today, “coronavirus” is one of the first words that automatically pops up to complete the search. It’s no surprise that travelers and travel advisors alike are thinking more about insurance during the pandemic. Yet navigating the fine print — and finding the best policy — can be a challenge, especially as the industry rethinks its approach to coverage.

Travel professionals, of course, already knew that travel insurance doesn’t cover everything. But clients who weren’t aware of its limitations may have learned a hard lesson upon discovering that pandemics aren’t covered by most policies. Many providers, in fact, stopped covering COVID-19-related losses as early as January, when the Centers for Disease Control and Prevention (CDC) issued its alert about the first travel-related case of the virus in the U.S. The pandemic, indeed, has forced the industry to look at travel insurance with new eyes.

“Before COVID-19, we always encouraged travelers to buy travel insurance,” said Rumit Mehta, founder and owner of Immersion Journeys, a New York City-based tour operator that specializes in Africa and South Asia. “But COVID-19 has revealed a lot of flaws in the system. We always knew the fine print existed, but the way the insurance companies were inundated with cancellation requests resulted in a lot of revelations about what the fine print says. Pandemics were somewhere down on the list of 8 million items that weren’t covered."

Dealing with insurance issues was especially trying during the first weeks of the pandemic, according to Kristy Adler, executive vice president and COO of Cruise & Resort, a Virtuoso agency in Sherman Oaks, Calif.

“A few of the difficulties with our insurance companies were the long phone hold times and email correspondence that was delayed up to several weeks,” she said. “Things are finally starting to get back to normal. Our primary insurer, Travelex Insurance Services, has recently improved its website. Now, policies can be easily edited online.”

COVID-19 has revealed a lot of flaws in the system. We always knew the fine print existed, but the way the insurance companies were inundated with cancellation requests resulted in a lot of revelations about what the fine print says. Pandemics were somewhere down on the list of 8 million items that weren’t covered.

The airline industry’s response to the crisis has further complicated insurance coverage, according to Sumeet Bains, operations manager at Victoria, B.C.-based Bains Travel.

“Pre-COVID-19 insurance policies are not covering airline cancellations since airlines are offering future travel vouchers,” she said. “Clients who did purchase travel insurance aren’t happy that they’re not covered due to the voucher issue. With so many people losing their jobs, they need the cash in hand now, not the promise of future travel.”

For John Clifford, president and travel designer at International Travel Management, a Virtuoso agency in San Diego, losing out on the commissions offered by insurance companies has made matters much worse for most agencies.

“Insurance commissions are some of the highest in our industry, and they have a big impact on profitability,” he said.

Clifford criticized other aspects of the insurance industry’s response, as well.

“We are not seeing any new notable features,” Clifford said. “What’s lacking are clear coverage explanations regarding COVID-19, border closures, airline route cessation and more.”

Considering the fact that the pandemic is far from over, Adler is worried that a lack of flexibility in supplier policies throughout the industry could create additional problems for her clients.

“I’m currently concerned for guests who had to cancel their trip and were told that the insurance companies would allow a one-time date transfer for their policy, with an extension on the date transfer until 12 months from the original departure date,” she said. “There’s a potential problem there, as more cancellation dates come in from our suppliers. I hope they will be flexible in allowing the policy transfer past 12 months.”

Travel advisors will need to address clients’ concerns about how travel insurance covers the pandemic.
*Credit: 2020 Fabio/stock.adobe.com*

With so many complicated issues affecting the travel industry today, advisors must make a special effort to document their clients’ choices regarding insurance, according to Lori Spoelstra, owner of Adventures by Lori, an Oasis Travel Network agency in Lowell, Mich.

“As a travel advisor, it will be more important than ever to make sure that we get that the client is accepting or declining insurance in writing,” she said. “We will not sell a vacation without insurance unless we have written documentation that the client is declining. In order to protect both the client and supplier, everyone will be purchasing insurance with their vacations — as well as ‘cancel for any reason’ (CFAR) policies whenever available.”

As a travel advisor, it will be more important than ever to make sure that we get that the client is accepting or declining insurance in writing.

The Quest for Coverage
During a pandemic, it’s only natural that the demand increases for CFAR travel insurance policies as travelers become more willing to fork over extra cash in exchange for more extensive protection. The problem now is that many travel insurance companies have either made the CFAR upgrade less generous, or they have discontinued it altogether.

Travelex, for example, is among the companies that have discontinued the CFAR option — although it does plan to reintroduce it at some point — and its current policies treat COVID-19 like any other illness in terms of coverage for travelers who get sick, according to Mike Ambrose, the company’s president and CEO.

“We plan to bring CFAR back,” he said. “And when we do, we will have the same requirements, but they may be more stringent to protect the carrier.”

Allianz Global Assistance has also made major changes to its coverage.

“Although travel insurance products generally do not cover pandemics, we have made several temporary accommodations to provide coverage for trip cancellations, trip interruptions and emergency medical care for those who become ill with COVID-19,” said Richard Aquino, the company’s U.S. vice president of sales. “We are allowing customers to use their travel insurance policy any time within 770 days of the day they purchased it, so that it can be used for a new or rescheduled trip.”

Allianz is also working to make access to information about its services more efficient. The company is streamlining product portfolios in order to simplify policies and make it easier for future travelers to understand the coverage and benefits.

“We believe that an educated customer is our best customer,” Aquino said. “So we are also urging our customers to take advantage of the 15-day free look period that we offer, so that they can take the time to read about the benefits of their travel insurance policy. If during that 15-day period a customer changes his or her mind and feels that their policy doesn’t meet their needs, they can purchase a different product or cancel their policy for a full refund.”

Insurance providers are also devising new plans to meet increased demand for domestic travel and road trips, although each policy has pandemic-related restrictions, generally limiting cancellations to travelers who actually have COVID-19. Providers also require a doctor’s note that states the client is unable to travel due to the virus. Travelex recently debuted Travel America, a new plan related to domestic travel, while Berkshire Hathaway Travel Protection has launched ExactCare Lite.

Agent Strategies
As the insurance industry reworks its products and services, it’s up to travel advisors to steer travelers in the right direction.

“Clients are expressing more interest in travel insurance, and they are wanting to know what it covers,” said Bonnie Lee, owner of a Travel Leaders host agency in Albertville, Minn. “Prior to COVID-19, most people assumed insurance covered everything.”

Clients are expressing more interest in travel insurance, and they are wanting to know what it covers. Prior to COVID-19, most people assumed insurance covered everything.

Lee points out that advisors are often required by law to offer travel insurance, while on the other hand, in many states only those who have been educated on the details of the policies and have a license can sell insurance. She says that in order to make sure clients are aware of their options, she sends at least two quotes from different providers.

“Since we don’t know our clients’ exact situations, it’s important to send two quotes, along with the information for the client to contact the insurance carrier with any specific questions,” Lee said.

Clifford, at International Travel Management, says finding the best coverage includes being educated on CFAR policies that come directly from tour operators and other suppliers. He says that the most important factor, which is often overlooked by travel advisors in today’s climate, is to strongly consider working with tour company partners.

He holds up Classic Vacations’ Prestige Plus Travel Smart Plan as an example of a policy that offers CFAR and other travel insurance benefits, along with protecting travel agency commissions.

“We recently had Classic refund a $14,000 Hawaii booking that had to cancel due to COVID-19, and our commission was protected,” he said. “This was the first time in my 30-plus years as a travel advisor I was able to use this plan.”

What’s Next?
Given the ongoing nature of the crisis, it’s still too early to determine the details of how travel insurance will evolve. But industry insiders have a few predictions to share.

“I think you’ll see more policies cover CDC warnings,” said Jason Schreier, CEO – USA at April Travel Protection, an international insurance group. “However, I’m not as optimistic that government-mandated shutdowns will be covered. Insurance companies will always continue to fear exposure to large concentrations of risk. Agents should have a grasp of the cancellation terms from the travel suppliers. They should also understand how the policies they’re offering work relative to COVID-19, as it’s a conversation most travelers will look to have with their travel agent.”

There have been recent efforts by Congress to introduce affordable, government-backed pandemic insurance to small businesses, and Immersion Journeys’ Mehta says that the government needs to provide this kind of leadership on the issue.

“There’s a lot of pressure on the insurance industry right now, just like after 9/11 when they went in and included terrorism in the language,” he said. “Now we might see pandemics included. But the legislature has to play a role in defining what is covered.”

Ambrose of Travelex also sees some similarities in the travel insurance industry’s response to 9/11 and the coronavirus pandemic.

“The parallel that I would draw is that there will be changes, and they’ll be positive,” he said. “Policies might be more expensive, but in the long run we’ll be better for it.”

One thing is certain: Pandemic-related coverage will be top of mind for travelers for the time being, according to Richard Job, vice president of commercial partnerships at Flight Centre Travel Group, an agency network that owns brands including Liberty Travel and GOGO Vacations.

“Coverage for a known event — COVID-19 — is what our customers are going to be most interested in,” he said. “COVID-19 has really demonstrated that no matter how much you believe you’ll be going on your vacation ‘no matter what,’ stuff happens. Of course, the lack of new bookings these days limits the sales of insurance. But we expect that as travel grows again — as people become more confident in traveling — our insurance attachment rate will be as high as it has ever been.”