Property and Casualty - National Association of Insurance [PDF]

2016 Fall National Meeting

Travel Insurance (C) Working Group

December 10, 2016 Miami, Florida

Date: 11/23/16 2016 Fall National Meeting Miami, Florida

TRAVEL INSURANCE (C) WORKING GROUP Saturday, December 10, 2016 7:30 – 8:30 a.m. Fontainebleau Miami—Flicker 1-3—Level 4

ROLL CALL Anne Melissa Dowling, Chair Geoff Margolis Stephen C. Taylor Susanne Murphy Gordon I. Ito James J. Donelon Al Redmer Jr. Angela Nelson

Illinois California District of Columbia Florida Hawaii Louisiana Maryland Missouri

John G. Franchini Timothy Johnson John D. Doak Elizabeth Kelleher Dwyer Todd E. Kiser Donald Beatty/Rebecca Nichols Mike Kreidler

New Mexico North Carolina Oklahoma Rhode Island Utah Virginia Washington

AGENDA 1.

Consider Adoption of its Summer National Meeting Minutes —Acting Director Anne Melissa Dowling (IL)

Attachment A

2.

Hear Comments Regarding the NCOIL Limited Lines Travel Insurance Model Act from Interested Parties

Attachment B

3.

Discuss Next Steps for the Working Group—Acting Director Anne Melissa Dowling (IL)

4.

Discuss Any Other Matters Brought Before the Working Group —Acting Director Anne Melissa Dowling (IL)

5.

Adjournment

© 2016 National Association of Insurance Commissioners

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Attachment A Consider Adoption of its Summer National Meeting Minutes

Draft Pending Adoption Attachment Fifteen Property and Casualty Insurance (C) Committee 8/28/16 Date: 9/8/16 Travel Insurance (C) Working Group San Diego, California August 26, 2016 The Travel Insurance (C) Working Group of the Property and Casualty Insurance (C) Committee met in San Diego, CA, Aug. 26, 2016. The following Working Group members participated: Anne Melissa Dowling, Chair (IL); Susan Stapp (CA); Susanne Murphy (FL); Grant Shintaku (HI); James J. Donelon (LA); Al Redmer Jr. (MD); Angela Nelson (MO); Tracy Biehn (NC); John G. Franchini (NM); John D. Doak, Gordon Amini, Joel Sander, Tyler Laughlin and Cuc Nguyen (OK); Elizabeth Kelleher Dwyer (RI); Todd E. Kiser and Tracy Klausmeier (UT); Donald Beatty and Rebecca Nichols (VA); and Lee Barclay (WA). Also participating were: George Bradner (CT); and Kevin Beagan (MA). 1.

Adopted its July 25 and June 21 Minutes

Commissioner Donelon made a motion, seconded by Ms. Biehn to adopt the Working Group’s July 25 (Attachment FifteenA) and June 21 (Attachment Fifteen-B) minutes. The motion passed unanimously. 2.

Heard Presentations from Interested Parties a.

Tourism and Travel Industry Consumer Coalition

Greg Mitchell (Frost Brown Todd LLC), representing the Tourism and Travel Industry Consumer Coalition (TTICC) gave his remarks (Attachment Fifteen-C), explaining what the TTICC is and its purpose. He said the travel service and insurance product area has matured, stating that it has unique needs and risks, is important to consumers and consists of myriad products being designed for unique purposes. He said the old-line definitions called for it to be filed as a property/casualty line, primarily as inland marine, but there is little definition around it. In looking at alternatives, transit definitions might be considered but other rules related to that do not apply to these types of products. There are a lot of complexities depending on the situation. He said it is difficult to apply what exists now to these products. Last, he said the TTICC stands ready to help in any way it can to ensure there is education and true understanding of what is involved with these types of products. He said the TTICC would like to ensure that neither consumers nor the industry are unnecessarily hurt in the process, being mindful of not driving up the cost of the product, resulting in consumers not purchasing it. b.

Center for Economic Justice

Birny Birnbaum (Center for Economic Justice—CEJ) presented his comments (Attachment Fifteen-D) related to the Working Group’s proposed issues to be addressed. He said there had not been any information provided regarding why the Working Group believes these or any other issues need to be reviewed. He said the Working Group should not interfere with any other activities going on, such as market conduction examinations, and said he hopes the results of that work would actually inform the activities of this Working Group. Mr. Birnbaum said the CEJ would like to see some basic metrics on the travel insurance industry so they can better understand how the business operates and what consumers are actually experiencing in the marketplace. In addition, any other issues that might come up related to products sold not directly but through third parties at the time of another transaction, would also be an area of interest, as it has the potential to result in unfair or deceptive sales practices. Mr. Birnbaum said the CEJ would also suggest the Working Group look at the range of opt-in and opt-out procedures employed by travel product marketers, as well as the type and extent of insurance versus non-insurance benefits being offered in a travel package. He said coordination of health care benefits also seems like an important area to look at, both from the perspective of the disclosures and how coordination is actually done. Mr. Birnbaum said terrorist attack exclusions should be reviewed, as it seems that should be covered, not excluded, given the current environment. Acting Director Dowling addressed Mr. Birnbaum’s comment about other activities currently in progress, stating that this Working Group is coordinating with those activities. The market conduct activity is focusing on what exists today and compliance with that; this Working Group is looking at how the industry is evolving and developing definitions going forward. She said these issues will sort themselves out so everyone can proceed more clearly. Regarding the request for data, © 2016 National Association of Insurance Commissioners

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Draft Pending Adoption Attachment Fifteen Property and Casualty Insurance (C) Committee 8/28/16 Acting Director Dowling agreed it would be helpful versus relying on anecdotal information, and said the request is duly noted. c.

U.S. Tour Operators Association

Terry Dale (U.S. Tour Operators Association—USTOA) provided an overview of the USTOA. It has 166 tour operators in the U.S., 700 suppliers and an economic footprint of $13.5 billion with 8.3 million customers. He said products are sold through the travel agency network and there is high customer satisfaction, with more than 60% repeat business on an annual basis. He said customers are satisfied because of the partnership between the tour operator, travel agent and licensed insurance provider. He said the USTOA supports the development of a model act to get clarity and consistency regarding the regulations and to increase transparency to consumers, helping them to better understand the benefits the product provides. He said this clarity, consistency and transparency would result in less costly compliance. He referred to the positive benefits that have resulted from producer licensing reforms as a case in point. He said if the same type of clarity and consistency in other areas of travel insurance products is not developed, the USTOA believes the result will be increased confusion for customers, increased cost and gaps in services that would result in customer dissatisfaction going on the rise. He said the industry wants to comply with what the regulations require today, but, in order to comply, the industry needs clarity and consistency. He said the USTOA is here to support the state insurance regulators in this effort and to provide any information on the process that would be useful. Acting Director Dowling asked Mr. Dale if the USTOA metrics include data on the use of insurance and the cost associated with the insurance component of the package. Mr. Dale said the USTOA has not had its consultant provide that data in the past, but he would inquire into that as a possibility. He said, unscientifically, but based on the USTOA annual survey, roughly 80% of USTOA’s members sell travel insurance through a licensed provider, but it was not part of the consultant’s study. Acting Director Dowling asked Mr. Dale if he knows whether USTOA partners require opting in for that part of the package as a condition of purchasing the product. Mr. Dale did not have that information, but said he could look into it and report back to the Working Group. Commissioner Redmer asked Mr. Dale if he could provide two or three specific issues that he would like to see the Working Group address. Mr. Dale said he could not, but said others on the panel could cover that. He said he is just providing an overview from the USTOA perspective. Mr. Beatty said he has read travel insurance policies and they are quite complicated, noting that the coverage in each can be different. He asked Mr. Dale if there is an easy way for consumers to be able to understand the coverage the policy provides, possibly in a synopsis. Mr. Dale said he would like to think there is, but the experts would say it is not easy. He said the key is education and communication, and the industry can do a better job of simplifying the information provided to consumers so it is clearer and more consistent, but he is not sure there is an easy way. d.

American Society of Travel Agents

Andrea da Rosa (Balboa Travel, Inc.) described what Balboa offers, and noted that she is also vice president of the local chapter of the American Society of Travel Agents (ASTA). She said travel agencies have been offering travel protection products for decades and have long-standing relationships with their clients. She said offering this product is incidental to their business. The median amount of insurance-related revenue is $3,619, or roughly 3.1% of median annual revenue. Most providers also provide 24-hour hotline services. Ms. da Rosa provided a real-life example of the benefit of travel insurance services. She said there is increased demand for these products and clients understand the need for them, especially in the uncertain world we live in today. She said the ASTA has heard few consumer complaints, and she is not aware of any at Balboa in more than 10 years. She said Balboa’s activities are limited to bringing clients’ attention to optional products, typically through brochures, a web link or website administered by a licensed travel insurance agent. She said Balboa does not hold itself out to be an insurance expert, risk assessor or anything similar. The products are distributed through multiple channels. She said Balboa and the ASTA believe the development of a model act, enacted uniformly across the states, would greatly benefit travel agents and their clients. She said licensing has been greatly improved by having a single standard for regulation that has been adopted in more than 40 states. Consumers benefit from clarity and consistency across the states, and it helps to ensure better and less costly compliance. She urged the Working Group to look at the issues comprehensively going forward so consumers continue to be well protected. © 2016 National Association of Insurance Commissioners

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Draft Pending Adoption Attachment Fifteen Property and Casualty Insurance (C) Committee 8/28/16 Acting Director Dowling asked Ms. da Rosa how the process works once the customer has expressed an interest in purchasing a travel insurance product. Ms. da Rosa said it depends on the type of travel. If the customer is working with a wholesaler, for example, that wholesaler may have an insurance product it offers. If the travel is a more custom and comprehensive trip with multiple custom components, then another insurance provider is probably going to be a better fit. In that case, a larger, more encompassing product offering may be in order. Sometimes, both may be offered. The customer may be provided multiple links to evaluate, often based on charts, which product is best for them. She said the charts are not always ideal because they are not representative of the entire policy, but customers may read the policy details if they choose. Any questions would be handled by the actual insurance agent, as the travel agent does not have that expertise. She said the travel agent will typically facilitate the purchase and provide the information when it comes through their location number, allowing their discount to be passed along to the customer. e.

Steptoe & Johnson LLP

Ed Schwartz (Steptoe & Johnson LLP) talked about the antitrust law implications related to travel insurance. Mr. Schwartz said travel agents offer travel products that include two components: 1) an insurance component; and 2) a non-insurance travel services component. The antitrust analysis is relevant in regard to these travel products because of the concept of tying arrangements, which is an antitrust issue. It was developed in the antitrust laws many decades ago and has evolved to one of the key types of potential violations of antitrust law. Tying arrangements involve a vertical arrangement, with two different players at two different layers of the transaction within the distribution chain. Mr. Schwartz said this may be helpful to state insurance regulators in discerning how to regulate this type of practice. Simply put, tying arrangements involve conditioning the purchase of one product on the purchase of another. The question is whether the consumer is being coerced to buy the second in order to buy the first. Mr. Schwartz said that, today, tying arrangements are often recognized as being procompetitive and they are seen everywhere. He said antitrust laws distinguish between which tying arrangements are procompetitive versus those that are anticompetitive by evaluating the following criteria: 1) Does it involve two products or just one? Generally this is determined based on how a consumer views it. In the case of these travel products containing both an insurance and a non-insurance component, it likely would be considered two products packaged into one. 2) Does any single firm have market power from an economic perspective with the ability to control price or output of the market? 3) Is the practice procompetitive or anticompetitive? 4) Is there true coercion? Mr. Schwartz said Steptoe & Johnson believes that travel products are pro-consumer, are not forced upon the consumer, and the consumer wants, and is happy with, the product. That would suggest it is procompetitive and not something that would violate antitrust laws. f.

U.S. Travel Insurance Association

John Fielding (Steptoe & Johnson LLP), representing the U.S. Travel Insurance Association (UStiA), said this is an important matter and urged the Working Group to take a comprehensive look at the issues. He said there is not a lot of public information available on consumer complaints. The UStiA surveyed its members and can provide the results of that survey to the Working Group. The NAIC’s data was used for the information already provided. The data indicates there is a low number of complaints, and that is consistent with the UStiA survey findings. He said loss ratios are a complicated issue that needs to be understood and the nuances considered. He said terrorism coverage was also raised on a previous conference call of the Working Group. Those exclusions depend on the state where the individual resides. He said some states permit those exclusions and others do not. Mr. Fielding said the main point he wants to make is to ask the Working Group to look at the issues in depth to ensure clarity and consistency in a comprehensive manner, so there can be a clear understanding of what is required in order to be compliant. Acting Director Dowling asked Mr. Fielding if it is possible the low complaint numbers are influenced by consumers not realizing they bought an insurance product or not knowing who to complain to, given the policy may have been purchased through a third party. She asked Mr. Fielding what might be appropriate in this area, in terms of an educational element. Mr. Fielding said more education is a good idea, but by virtue of consumers knowing to file a claim and claims being paid, he © 2016 National Association of Insurance Commissioners

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Draft Pending Adoption Attachment Fifteen Property and Casualty Insurance (C) Committee 8/28/16 said that, by and large, they understand they have coverage and what it covers. Having said that, he said it is always helpful to educate consumers and for them to know who to go to if something goes wrong. 3.

Discussed its Activities for 2016 Based on Proposed Issues to be Addressed by the Working Group

Commissioner Donelon said oil, tourism and travel are the major industries in Louisiana. He said he spoke with a travel insurer in Louisiana some time ago, who asked him what this Working Group is working toward. The insurer said there are some “bad actors” in the travel insurance business and there is interest in engaging him, as insurance commissioner, to assist in resolving those issues. Commissioner Donelon said tourism and travel are valuable and important parts of the Louisiana economy, and he looks forward to working with all of the stakeholders to address these concerns. Superintendent Franchini said, in his experience, having owned travel and insurance agencies, is that this product protects travelers. His agency made sure travelers had insurance—sometimes even buying it for them because it was such a great value—because, if something were to happen, which often did, it would often ensure repeat customers because they appreciated being protected. He said positive things often get no attention, noting that great things are happening in this area. He said the Working Group needed to make sure this process is as transparent, open and easy as possible. Mr. Amini encouraged the Working Group, after participating in Market Analysis (D) Working Group process, to expand the items to be addressed significantly. He said that process demonstrated the lack of uniformity in state laws that make it difficult to craft a comprehensive solution. A lot of time has been spent on defining what is and what is not, travel insurance. He said some of the categories had little definition. He said the travel insurance component of the product is incidental to the travel operators’ overall business and sometimes that gets lost in the discussion. He said often the complaints that are made have more to do with the persons involved in the transaction than the actual insurance product. He said the Market Analysis (D) Working Group proceedings will be based on current law, and this Working Group’s focus needs to be forward-looking and comprehensively address the issues that have been encountered with uniformity in mind. Acting Director Dowling said the Working Group needs to discuss proposed issues to be addressed. She said she believes the proposed issues previously presented encompass the items raised by Mr. Amini and others. She said she is also sensitive to the proportion of the overall product that is actual insurance versus the other components that make up the package. Commissioner Doak said the Working Group should be careful to not restrict benefits to consumers in the process of developing its work product. He said products are evolving such that a lot of different things are being packaged together that benefit the consumer. He said travel insurance has been around a long time and complaints are low. He also said the Working Group needs to take into consideration, as part of its deliberations, the new technologies and packaged products that are benefiting consumers, and insurance versus non-insurance products in terms of what insurance regulators do and do not regulate. Acting Director Dowling said the Working Group needs some time to absorb all of this information. She said the Working Group will meet via conference call in the near future to determine which issues to address. 4.

Discussed Other Matters

Timothy Stoltzfus Jost (Virginia Organizing) asked the Working Group to include coordination of medical benefits as an issue to be addressed, including looking at whether the consumer needs supplemental coverage and, if multiple coverages exist, determining and understanding which is primary, secondary, etc. Acting Director Dowling said the Working Group would be sure to include that on its list to discuss. Acting Director Dowling said the District of Columbia has been added to the membership of the Working Group. Having no further business, the Travel Insurance (C) Working Group adjourned. W:\National Meetings\2016\Summer\Cmte\C\Travel Insurance WG\8-26 Travel Ins WG min.docx

© 2016 National Association of Insurance Commissioners

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Attachment B Hear Comments Regarding the NCOIL Limited Lines Travel Insurance Model Act from Interested Parties

NATIONAL CONFERENCE OF INSURANCE LEGISLATORS (NCOIL) Limited Lines Travel Insurance Model Act Adopted by the NCOIL Property-Casualty Insurance Committee on November 16, 2012, and Executive Committee on November 18, 2012. Sponsored by Rep. Robert Damron (KY). Section 1. Short Title This Act shall be known as the “Limited Lines Travel Insurance Model Act.” Section 2. Scope and Purposes A. The purpose of this Act is to promote the public welfare by creating a comprehensive legal framework within which Travel Insurance may be sold in this state through the establishment of clear regulatory obligations for those involved in the development and distribution of Travel Insurance, preserving the unique aspects of Travel Protection Plans, and protecting and benefiting consumers by encouraging fair and effective competition within the market. B. The requirements of this Act shall apply to Travel Insurance, whether or not provided as part of a Travel Protection Plan, where policies and certificates are delivered or issued for delivery in this state. It shall not be applicable to Cancellation Fee Waivers and Travel Assistance Services, except as expressly provided herein. C. All other applicable provisions of this state’s insurance laws shall continue to apply to Travel Insurance except that the specific provisions of this Act shall supersede any general provisions of law that would otherwise be applicable to Travel Insurance. In the case of any conflict between the provisions of this Act and any other provisions of the insurance laws of this state, the provisions of this Act shall prevail. Section 23. Definitions As used in this Act: “Blanket Travel Insurance” means Travel Insurance issued to any Group providing coverage for specified circumstances and specific classes of persons defined in the policy and issued to a policyholder and not by specifically naming the persons covered, by

certificate or otherwise, although a statement of the coverage provided may be given, or required by policy to be given, to eligible persons. “Cancellation Fee Waiver” means a contractual agreement between a supplier of travel arrangements or travel services and its customer to waive some or all of the nonrefundable cancellation fee or penalty provisions of the underlying travel contract between the supplier and customer without regard to the reason for the cancellation or form of reimbursement. A Cancellation Fee Waiver is not insurance. "Commissioner" means the commissioner of insurance of this state. Drafting Note: Insert the title of the state’s chief insurance regulatory official wherever the term "Commissioner" appears. “Eligible Group” means any of the following: a.

Any entity engaged in the business of providing travel or travel services, including but not limited to: tour operators, lodging providers, vacation property owners, hotels and resorts, travel clubs, property managers, cultural exchange programs, and common carriers of passengers, including but not limited to airlines, cruise lines, railroads, steamship companies, and public bus carriers;

b.

Any college, school, or other institution of learning covering students, teachers or employees defined by reference to specified hazards incident to activities or operations of the institution of learning;

c.

Any employer covering any group of employees, contractors, dependents or guests, defined by reference to specified hazards incident to activities or operations of the employer;

d.

Any sports team, camp, or sponsor thereof covering participants, members, campers, employees, officials, supervisors, or volunteers;

e.

Any religious, charitable, recreational, educational, or civic organization or branch thereof covering any group of members, participants, or volunteers defined by reference to specified hazards incident to any activity or activities or operations sponsored or supervised by or on the premises of such organization or branch;

f.

Any financial institution or financial institution vendor, or parent holding company, trustee, or agent of or designated by one or more financial institution or financial institution vendor, under which accountholders, credit card holders, debtors, guarantors, or purchasers are insured;

g.

Any incorporated or unincorporated association, including labor unions, having a common interest, constitution and bylaws, and organized and maintained in good faith for purposes other than obtaining insurance for members or participants of such association;

h.

Any trust or the trustees of a fund established, created or maintained for the benefit of members or customers of one or more associations meeting the above requirements;

i.

Any entertainment production company covering any group of participants, volunteers, audience members, contestants, or workers;

j.

Any newspaper or other publisher covering its journalists and carriers;

k.

Any volunteer fire department or any first aid, civil defense or other such volunteer group, or agency having jurisdiction thereof, covering all or any group of the members, participants or volunteers of such fire department or first aid, civil defense or other group; or

l.

Any other group where the Commissioner has determined that the members are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, and that issuance of the policy would not be contrary to the best interests of the public.

“Group Travel Insurance” means Travel Insurance issued to any Eligible Group. A. “Limited Lines Travel Insurance Producer” means a: (i) licensed managing general agent or third party administrator, (ii) licensed insurance producer, including a limited lines producer, or (iii) Travel Administrator. 1. Licensed managing general underwriter, 2. Licensed managing general agent or third party administrator, or 3. Licensed insurance [producer/agent] designated by an insurer as the travel insurance supervising entity as set forth in Section 6 below. B. “Offer and disseminate” means providing general information, including a description of the coverage and price, as well as processing the application, collecting premiums, and performing other non-licensable activities permitted by the state. “Travel Administrator” means a person who directly or indirectly underwrites, collects charges, collateral or premiums from, or adjusts or settles claims on residents of this state, in connection with Travel Insurance Coverage, except that a person shall not be considered a Travel Administrator if that person’s only actions that would otherwise cause it to be considered a Travel Administrator are among the following:

a. b.

a person working for a Travel Administrator to the extent that the person’s activities are subject to the supervision and control of the Travel Administrator; an insurer administering insurance coverage for its policyholders, subscribers or certificate-holders, or those of an affiliated insurer under common management and control;

c.

an insurer directly or indirectly underwriting, collecting charges, collateral or premiums from, or adjusting or settling claims for Travel Insurance, provided that the insurer is licensed in this state to write that line of insurance coverage;

d.

an insurance producer selling insurance or engaged in administrative and claims related activities within the scope of the producer’s license;

e.

a Travel Retailer offering and disseminating Travel Insurance and registered under the license of a Limited Lines Travel Insurance Producer in accordance with this Act;

f.

an individual adjusting or settling claims in the normal course of that individual’s practice or employment as an attorney at law and who does not collect charges or premiums in connection with insurance coverage; or

g.

a business entity that is affiliated with a licensed insurer while acting as a Travel Administrator for the direct and assumed insurance business of an affiliated insurer.

“Travel Assistance Services” means non-insurance services that may be distributed by Limited Lines Travel Insurance Producers or other entities, and for which there is no indemnification. Travel Assistance Services include, but are not limited to: security advisories, destination information; vaccination and immunization information services; travel reservation services; entertainment, activity and event planning; translation assistance, emergency messaging; international legal and medical referrals; medical case monitoring; coordination of transportation arrangements; emergency cash transfer assistance; medical prescription replacement assistance; passport and travel document replacement assistance; lost luggage assistance; and concierge services. Travel Assistance Services are not insurance. C. “Travel Insurance” means insurance coverage for personal risks incident to planned travel, including but not limited to: 1. interruption or cancellation of trip or event; 2. loss of baggage or personal effects; 3. damages to accommodations or rental vehicles; or 4. sickness, accident, disability or death occurring during travel.

Travel insurance does not include major medical plans, which provide comprehensive medical protection for travelers with trips lasting six (6) months or longer, including for example, those working overseas as an ex-patriot or military personnel being deployed. “Travel Protection Plans” means plans that provide one or more of the following: Travel Insurance, Travel Assistance Services, and Cancellation Fee Waivers. D. “Travel Retailer” means a business entity that makes, arranges or offers travel services and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a Limited Lines Travel Insurance Producer. Drafting Note: States that have recently adopted Travel Insurance producer licensing and registration laws or regulations may refer to the applicable definitions adopted therein rather than restating them in this section. Section 3. Requirements Section 4. Licensing and Registration A. The Commissioner may issue to an individual or business entity that has filed with the Commissioner an application for such limited license in a form and manner prescribed by the Commissioner, a Limited Lines Travel Insurance Producer License, which authorizes the Limited Lines Travel Insurance Producer to sell, solicit or negotiate Travel Insurance through a licensed insurer. A.B. A Travel Retailer may offer and disseminate Travel Insurance under a Limited Lines Travel Insurance Producer business entity (“licensed business entity”) license only if the Limited Lines Travel Insurance Producer complies with the following conditions are met: 1. The Limited Lines Travel Insurance Producer or Travel Retailer provides to purchasers of travel insurance: a. A description of the material terms or the actual material terms of the insurance coverage; b. A description of the process for filing a claim; c. A description of the review or cancellation process for the travel insurance policy; and d. The identity and contact information of the insurer and Limited Lines Travel Insurance Producer. 2. At the time of licensure, the Limited Lines Travel Insurance Producer shall establish and maintain a register on a form prescribed by the [insert commissioner] of each Travel Retailer that offers Travel Insurance on the Limited Lines Travel Insurance Producer’s behalf. The register shall be maintained and

updated by the limited lines travel insurance producer and shall include the name, address, and contact information of the Travel Retailer and an officer or person who directs or controls the Travel Retailer’s operations, and the Travel Retailer’s Federal Employment Tax Identification Number. The Limited Lines Travel Insurance Producer shall submit such register to the state insurance department upon reasonable request. The Limited Lines Travel Insurance Producer shall also certify that the Travel Retailer registered complies with 18 USC 1033. 3. The Limited Lines Travel Insurance Producer has designated one of its employees who is a licensed individual producer as the person (a “Designated Responsible Producer” or “DRP”) responsible for the Limited Lines Travel Insurance Producer’s compliance with the travel insurance laws, rules and regulations of the state. 4. The DRP, president, secretary, treasurer, and any other officer or person who directs or controls the Limited Lines Travel Insurance Producer’s insurance operations comply with the fingerprinting requirements applicable to insurance producers in the resident state of the Limited Lines Travel Insurance Producer. 5. The Limited Lines Travel Insurance Producer has paid all applicable insurance producer licensing fees as set forth in applicable state law. 6. The Limited Lines Travel Insurance Producer requires each employee and authorized representative of the Travel Retailer whose duties include offering and disseminating Travel Insurance to receive a program of instruction or training, which may be subject to review by the commissioner. The training material shall, at a minimum, contain instructions on the types of insurance offered, ethical sales practices, and required disclosures to prospective customers. 7. Limited Lines Travel Insurance Producers, and those registered under its license, are exempt from the examination requirements under [cite applicable state code section], and the continuing education requirements of [cite applicable state code section]. BC. Any Travel Retailer offering or disseminating travel insurance shall make available to prospective purchasers brochures or other written materials that: 1. Provide the identity and contact information of the insurer and the Limited Lines Travel Insurance Producer; 2. Explain that the purchase of travel insurance is not required in order to purchase any other product or service from the Travel Retailer; and 3. Explain that an unlicensed Travel Retailer is permitted to provide general information about the insurance offered by the Travel Retailer, including a description of the coverage and price, but is not qualified or authorized to answer

technical questions about the terms and conditions of the insurance offered by the Travel Retailer or to evaluate the adequacy of the customer’s existing insurance coverage; CD. A Travel Retailer’s employee or authorized representative, who is not licensed as an insurance producer may not: 1. Evaluate or interpret the technical terms, benefits, and conditions of the offered travel insurance coverage; 2. Evaluate or provide advice concerning a prospective purchaser’s existing insurance coverage; or 3. Hold himself or itself out as a licensed insurer, licensed producer, or insurance expert. E. Notwithstanding any other provision in law, A Travel Retailer whose insurance-related activities, and those of its employees and authorized representative, are limited to offering and disseminating Travel Insurance on behalf of and under the direction of a Limited Lines Travel Insurance Producer meeting the conditions stated in this Act, is authorized to do so and receive related compensation, upon registration by the Limited Lines Travel Insurance Producer as described in Sub-section (B)(2) above. F. Responsibility: As the insurer designee, the Limited Lines Travel Insurance Producer is responsible for the acts of the Travel Retailer and shall use reasonable means to ensure compliance by the Travel Retailer with this Act. Drafting Note: States that have already implemented a licensing and registration law or regulation consistent with NAIC Uniform Licensing Standard 34 (Limited Lines Travel Insurance Standard) may choose to cross-reference that law or regulation instead of using the language set forth in this Section. States that have not yet implemented such a law or regulation with respect to Travel Insurance may choose to incorporate this Section under their existing producer licensing laws. Section 5.

Premium Tax

A. A travel insurer shall pay premium tax on Travel Insurance Premiums paid by any of the following: 1. an individual policyholder who is a resident of this state; 2. a certificate-holder who is a resident of this state who elects coverage under a Group Travel Insurance policy; or 3. an Eligible Group that is resident in, or has its principal place of business in, this state that purchases a Blanket Travel Insurance policy.

B.

An insurer shall obtain and maintain documentation necessary to determine the state to which premium tax should be reported based on information provided by the policyholder or certificate-holder, as applicable.

Section 6.

Competitive Market

A. A competitive market is presumed to exist for Travel Insurance unless the Commissioner, after hearing, determines that a reasonable degree of competition does not exist in the market and the Commissioner issues a ruling to that effect. Such ruling shall expire no later than one year after issue unless the Commissioner renews the ruling after hearing and a finding as to the continued lack of a reasonable degree of competition. B. In determining whether a reasonable degree of competition exists, the Commissioner shall consider relevant tests of workable competition pertaining to market structure, market performance, and market conduct, and the practical opportunities available to consumers in the market to acquire pricing and other consumer information and to compare and obtain insurance from competing insurers. The tests for determining whether a competitive market exists shall include one or all of the following: 1. 2. 3. 4. 5. 6. 7.

The size and number of firms actively engaged in the market; Market shares and changes in market shares of firms; Ease of entry and exit from a given market; Underwriting restrictions; Whether profitability for companies generally in the market segment is unreasonably high; The availability of consumer information concerning the product and sales outlets or other sales mechanisms; and Efforts of insurers to provide consumer information.

C. The determination of competition involves the interaction of the various tests and the weight given to specific tests depends upon the particular situation and pattern of test results. Section 7.

Forms and Rates

A. Travel Insurance shall be classified and filed under an inland marine line of insurance. The definition of inland marine insurance shall include Travel Insurance. Drafting Note: If your state does not have a statutory definition of inland marine insurance, the second sentence of subsection A should be deleted. B. All Travel Insurance policies, certificates of insurance, endorsements, riders and rates delivered, issued for delivery, or charged in this state shall be filed with the Commissioner before being used. No policy, certificate of insurance, or endorsement

shall be issued until the expiration of thirty (30) days after it has been filed, unless the Commissioner shall have given prior written approval. Drafting note: This subsection is for those states that have form and/or rate filing requirements. C. Eligibility and underwriting standards for Travel Insurance may be developed and provided based on Travel Protection Plans designed for individual or identified marketing or distribution channels, and the Travel Insurance offered as part of the Travel Protection Plan may be offered as individual Travel Insurance, Group Travel Insurance, or Blanket Travel Insurance. D. Rates filed subject to this Section shall be made in accordance with the following provisions: 1.

Rates shall not be excessive, inadequate or unfairly discriminatory. a.

Excessive rates. i. ii.

2.

A rate in a competitive market is not excessive. A rate in a noncompetitive market is excessive if it is likely to produce a profit that is unreasonably high for the insurance provided or if expenses are unreasonably high in relation to services rendered.

b.

Inadequate Rates. A rate is not inadequate unless such rate is clearly insufficient to sustain projected losses, expenses and special assessments in the class of business to which it applies and the use of such rate has or, if continued, will have the effect of substantially lessening competition or the tendency to create monopoly in any market.

c.

Unfairly Discriminatory Rates. Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory if it is averaged broadly among persons insured under single insurance plans, whether offered on an individual, Group, or Blanket Travel Insurance policy.

In determining whether rates comply with the excessiveness standard upon a finding of a noncompetitive market under subparagraph 1(a)(ii), the inadequacy standards under subparagraph 1(b), or the unfair discrimination standard under subparagraph 1(c), the following criteria shall apply: a.

Due consideration shall be given to past and prospective loss experience within and outside this state; to the conflagration and

catastrophe hazards; to a reasonable margin for profit and contingencies; to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers; to past and prospective expenses both countrywide and those specifically applicable to this state; and to provisions for special assessments and to all other relevant factors within and outside the state.

Section 8.

b.

Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for risks in accordance with rating plans that establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses. No risk classification, however, may be based upon race, creed, national origin or the religion of the insured.

c.

The expense provisions included in the rates to be used by an insurer shall reflect the operating methods of the insurer and its anticipated expenses.

d.

The rates may contain provision for contingencies and an allowance permitting a reasonable profit. In determining the reasonableness of the profit, consideration shall be given to all investment income attributable to the line of insurance. Travel Protection Plans

Travel Protection Plans may be offered for one price in this state if: A. There is no finding by the Commissioner, pursuant to Section 5, that the Travel Insurance market in the state is non-competitive or that the Travel Protection Plan restricts competition by either significantly decreasing output or efficiency in the market or that a travel insurer or Travel Retailer is exerting sufficient market power in providing Travel Insurance or Travel Protection Plans such that competition is adversely impacted or that the Travel Protection Plan would exact burdensome terms that would not exist in a competitive market; B. The Travel Insurance, Travel Assistance Services and Cancellation Fee Waivers are clearly delineated in the Travel Protection Plan’s fulfillment materials. The fulfillment materials shall include the Travel Insurance disclosures required under state law and the contact information for persons providing Travel Assistance Services and Cancellation Fee Waivers, as applicable; and C. The Travel Protection Plan clearly discloses to the consumer at the time of purchase and fulfillment that it includes Travel Insurance, Travel Assistance Services and

Cancellation Fee Waiver, as applicable, and provides an opportunity for the consumer to obtain additional information regarding the features and pricing of each. Section 9.

Sales Practices

A. All persons offering Travel Insurance to residents of this state are subject to the Unfair Trade Practices Act at [insert reference to state UTPA law], except as otherwise provided in this Section. B. Illusory Travel Insurance. Offering or selling a Travel Insurance policy that could never result in payment of any claims for any insured under the policy is an unfair trade practice under [insert reference to state UTPA law]. C. Marketing. 1.

All documents provided to consumers prior to the purchase of Travel Insurance, including but not limited to sales materials, advertising materials, and marketing materials, shall be consistent with all Travel Insurance policy documents, including but not limited to, forms, endorsements, policies, rate filings and certificates of insurance.

2.

Travel Insurance policies or certificates that contain pre-existing condition exclusions must clearly disclose the exclusion in the coverage’s fulfillment materials.

3.

Policyholders or certificateholders shall have a minimum of 10 days from the date of purchase to review and cancel the policy or certificate for a full refund of the Travel Protection Plan price, unless the insured has either started the covered trip or has filed a claim under the Travel Insurance coverage.

D. Opt out. Unless otherwise permitted by state or federal law, no person offering Travel Insurance or Travel Protection Plans on an individual or Group basis may do so using negative option or opt-out, which would require a consumer to take an affirmative action to deselect coverage such as unchecking a box on an electronic form when they purchase a trip. E. It shall not be an unfair trade practice to include Blanket Travel Insurance coverage with the purchase of a trip, provided the coverage is not marketed as free. Section 10. A. person:

Travel Administrator License

License Required. 1.

No person shall act as a Travel Administrator in this state unless that

2. B.

a.

is licensed as a Travel Administrator pursuant to this Act;

b.

holds a valid third party administrator (TPA) or managing general agent (MGA) license in this state.

A Travel Administrator and its employees are exempt from the licensing requirements of [reference to adjuster licensing act].

Application for Licensure. 1.

A Travel Administrator applying to this state for licensure shall use the uniform application and designate an individual as the Travel Administrator’s contact person for department communications.

2.

The uniform application shall include or be accompanied by the following information and documents: a.

All basic organizational documents of the applicant, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement and other applicable documents and all amendments to such documents;

b.

The bylaws, rules, regulations or similar documents regulating the internal affairs of the applicant;

c.

NAIC Biographical Affidavit for the individuals who are responsible for the conduct of affairs of the applicant; including all members of the board of directors, board of trustees, executive committee or other governing board or committee; the principal officers in the case of a corporation or the partners or members in the case of a partnership, association or limited liability company; any shareholders or member holding directly or indirectly ten percent (10%) or more of the voting stock, voting securities or voting interest of the applicant; and any other person who exercises control or influence over the affairs of the applicant;

d.

Audited annual financial statements or reports for the two (2) most recent fiscal years that prove that the applicant has a positive net worth. If the applicant has been in existence for less than two (2) fiscal years, the uniform application shall include financial statements or reports, certified by an officer of the applicant and prepared in accordance with GAAP, for any completed fiscal years, and for any month during the current fiscal year for which such financial statements or reports have been completed. An

audited financial/annual report prepared on a consolidated basis shall include a columnar consolidating or combining worksheet that shall be filed with the report and include the following: a) amounts shown on the consolidated audited financial report shall be shown on the worksheet; b) amounts for each entity shall be stated separately, and c) explanations of consolidating and eliminating entries shall be included. The applicant shall also include such other information as the commissioner may require to review the current financial condition of the applicant. e.

A statement describing the business plan including information on staffing levels and activities proposed in this state and nationwide. The plan shall provide details setting forth the applicant's capability for providing a sufficient number of experienced and qualified personnel in the areas of claims processing, record keeping and underwriting; and

f.

Such other pertinent information as may be required by the commissioner.

3.

A Travel Administrator licensed or applying for licensure under this section shall make available for inspection by the commissioner copies of all contracts with payors or other person utilizing the services of the Travel Administrator.

4.

A Travel Administrator licensed or applying for licensure under this section shall produce its accounts, records and files for examination, and make its officers available to give information with respect to its affairs, as often as reasonably required by the commissioner.

5.

The commissioner may refuse to issue a license if the commissioner determines that the Travel Administrator or any individual responsible for the conduct of affairs of the Travel Administrator is not competent, trustworthy, financially responsible or of good personal and business reputation, or has had an insurance or a Travel Administrator certificate of authority or license denied or revoked for cause by any jurisdiction , or if the commissioner determines that any of the grounds set forth in subsection C hereof exists.

6.

A license issued under this section shall remain valid, unless surrendered, suspended or revoked by the commissioner, for so long as the Travel Administrator continues in business in this state and remains in compliance with this Act.

7.

A Travel Administrator licensed or applying for licensure under this section shall notify the commissioner within thirty days of any material

change in its ownership, control, contact person for the Travel Administrator or other fact or circumstance affecting its qualification for a license in this state. The commissioner shall report any such changes to [insert name of the appropriate electronic database]. C.

Grounds for Denial, Suspension or Revocation of Licensure 1.

2.

The commissioner shall deny, suspend or revoke the license of a Travel Administrator, or shall issue a cease and desist order should the Travel Administrator not have a license if, after notice and opportunity for hearing, the commissioner finds that the Travel Administrator: a.

Is in an unsound financial condition;

b.

Is using such methods or practices in the conduct of its business so as to render its further transaction of business in this state hazardous or injurious to insured persons or the public; or

c.

Has failed to pay any judgment rendered against it in the state within sixty (60) days after the judgment became final.

The commissioner may deny, suspend or revoke the license of a Travel Administrator, or may issue a cease and desist order should the Travel Administrator not have a license if, after notice and opportunity for hearing, the commissioner finds that the Travel Administrator: a.

Has violated any lawful rule or order of the commissioner or any provision of the insurance laws of this state;

b.

Has refused to be examined or to produce its accounts, records and files for examination, or if any individual responsible for the conduct of affairs of the Travel Administrator, including members of the board of directors, board of trustees, executive committee or other governing board or committee; the principal officers in the case of a corporation or the partners or members in the case of a partnership, association or limited liability company; any shareholder or member holding directly or indirectly ten percent (10%) or more of the voting stock, voting securities or voting interest of the Travel Administrator; and any other person who exercises control or influence over the affairs of the Travel Administrator; has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to an examination, when required by the commissioner;

c.

Has, without just cause, refused to pay proper claims or perform services arising under its contracts or has, without just cause,

caused covered individuals to accept less than the amount due them or caused covered individuals to employ attorneys or bring suit against the Travel Administrator or a payor which it represents to secure full payment or settlement of such claims;

3.

d.

Is required pursuant to this Act to have a license and fails at any time to meet any qualification for which issuance of a license could have been refused had the failure then existed and been known to the commissioner, unless the commissioner issued a license with knowledge of the ground for disqualification and had the authority to waive it;

e.

If any of the individuals responsible for the conduct of its affairs, including members of the board of directors, board of trustees, executive committee or other governing board or committee; the principal officers in the case of a corporation or the partners or members in the case of a partnership, association or limited liability company; any shareholder or member holding directly or indirectly ten percent (10%) or more of its voting stock, voting securities or voting interest; and any other person who exercises control or influence over its affairs; has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld; or

f.

Is under suspension or revocation in another state.

a. The commissioner in his or her discretion, without advance notice, and before a hearing, may issue an order immediately suspending the license of a Travel Administrator or may issue a cease and desist order should the Travel Administrator not have a license, if the commissioner finds that one or more of the following circumstances exist: i. The Travel Administrator is insolvent or impaired; ii. A proceeding for receivership, conservatorship, rehabilitation or other delinquency proceeding regarding the Travel Administrator has been commenced in any state; or iii. The financial condition or business practices of the Travel Administrator otherwise pose an imminent threat to the public health, safety or welfare of the residents of this state. b.

At the time an order has been issued by the commissioner in accordance with Paragraph i of this subsection, the commissioner shall serve notice to the Travel Administrator that the Travel Administrator may request a hearing within ten business days after

the receipt of the order. If a hearing is requested, the commissioner shall schedule a hearing within ten business days after receipt of the request. If a hearing is not requested and the commissioner orders none, the order shall remain in effect until modified or vacated by the commissioner. 4.

If the commissioner finds that one or more grounds exist for the suspension or revocation of a license issued under this part, or for a cease and desist order, the commissioner may, in lieu of or in addition to the suspension, revocation or cease and desist order, impose a fine upon the Travel Administrator.

Drafting Note: States with disciplinary provisions of general applicability for regulated insurance entities may wish to incorporate such provisions by reference and should revise the provisions of this section to the extent inconsistent with the state's general statutory scheme. Section 11.

Administrator Audits

When a Travel Administrator administers benefits in connection with Travel Insurance for more than one hundred (100) certificate-holders, subscribers, claimants or policyholders on behalf of an insurer, the insurer shall, at least semiannually, conduct a review of the operations of the Travel Administrator. At least one such semiannual review shall include an on-site audit of the Travel Administrator. The costs of such reviews or audits shall be borne by the insurer and not reimbursed by the Travel Administrator. The requirements of this subsection shall not apply when the insurer is affiliated with the Travel Administrator. Drafting Note: States may already have audit requirements for TPAs and MGAs and therefore should revise this Section to avoid duplicative audits of the same entity. Section 4 12. Registration A Travel Retailer whose insurance-related activities, and those of its employees, are limited to offering and disseminating Travel Insurance on behalf of and under the direction of a Limited Lines Travel Insurance Producer meeting the conditions stated in this Act, is authorized to do so and receive related compensation, upon registration by the Limited Lines Travel Insurance Producer as described in Section 3(A)4(B)(2) above. Section 5 13. Policy Travel insurance may be provided under an individual policy or under a group or master policy. Section 6 14. Responsibility

As the insurer designee, the Limited Lines Travel Insurance Producer is responsible for the acts of the Travel Retailer and shall use reasonable means to ensure compliance by the Travel Retailer with this Act. Section 7 15. Enforcement The Limited Lines Travel Insurance Producer and any Travel Retailer offering and disseminating travel insurance under the Limited Lines Travel Insurance Producer License shall be subject to the [insert statutory code citations for (i) the applicable unfair trade practices provisions of the insurance code and (ii) enforcement provisions applicable to insurance producers generally]. A. The Commissioner may conduct investigations or examinations of travel insurers, Limited Lines Travel Insurance Producers, Travel Retailers, and Travel Administrators to enforce the provisions of this Act to protect resident Travel Insurance consumers. B. The Commissioner may take action, following notice and a hearing, necessary or appropriate to enforce the provisions of this Act, Commissioner's orders, and state statutes to protect consumers of Travel Insurance in this state, pursuant to Section [insert reference to state notice/hearings/court actions law]. C. A person found in violation of this Act or orders or regulations of the Commissioner may be assessed a civil or administrative penalty not to exceed $10,000 per type of violation. Drafting Note: It is recommended that states review the enforcement procedures in their insurance laws and administrative procedure laws and ensure that enforcement authority under this Section is designated to the proper official(s). Section 8. 16 Effective Date This Act shall take effect 90 days after enactment. © National Conference of Insurance Legislators (NCOIL)

2101 L Street NW Suite 400 Washington, DC 20037 202-828-7100 Fax 202-293-1219 www.aiadc.org

December 6, 2016 Director Anne Melissa Dowling, Chair Travel Insurance (C) Working Group NAIC Central Office 1100 Walnut, Suite 1500 Kansas City, MO 64106-2197 Attn: Denise Matthews, Director RE:

Draft Travel Insurance Model Law

Dear Director Dowling: The American Insurance Association (AIA)1 appreciates the opportunity to provide initial comments on the draft Travel Insurance Model Law (model law). We support the efforts of this working group to bring consistent and predictable regulation to the travel insurance industry in a manner that protects consumers and promotes the innovation and growth of this beneficial product. To that end, we note many positive elements of this model law to include, but not limited to, the definition of eligible groups, clarity as to expectations around premium taxes and rate and form filing obligations, and codifying recent state bulletins surrounding opt-out expectations. In addition, as we move through this process, we look forward to a thoughtful analysis to clarify the intent of various provisions and to tighten definitions, as necessary, to avoid any unintended impacts on similar lines of business. We also note that there may be additional opportunities to reference back to existing law as has been done with the reference to the Unfair Trade Practices Act in section 9. For instance, some of the provisions on excessive rates may already be reflected in state insurance codes. Again, AIA appreciates the opportunity to provide initial feedback and looks forward to continuing to work with the Working Group to adopt a model law that can be uniformly adopted across the country. We support this initial first step and encourage continued collaborative, thoughtful, and deliberate momentum on this issue. Respectfully submitted,

Angela Gleason Counsel 1

AIA comprises approximately 325 major U.S. and non-U.S. insurance companies that write more than $127 billion in premium each year and provide all lines of property-casualty insurance to U.S. consumers and businesses.

To:

Director Anne Melissa Dowling, NAIC Travel Insurance Working Group

From: Birny Birnbaum, Center for Economic Justice and NAIC Consumer Representative Timothy Jost, NAIC Consumer Representative Re:

Preliminary Comments on 11/28/2016 Draft NAIC Travel Insurance Model Act

Date: December 5, 2016 We write with preliminary comments on draft NAIC Travel Insurance Model Act. Given the short time frame for review and comment right before the Fall National meeting, our comments will be high-level and not comprehensive. Failure to Separate Insurance and Non-Insurance Products The proposed NAIC model defines and permits the sale of “Travel Protection Plans” which include insurance products – “Travel Insurance” – and non-insurance products – “Travel Assistance Services” and “Cancellation Fee Waivers/” We strongly oppose the bundling of insurance and non-insurance products because such bundled products are inherently deceptive to a consumer. By bundling insurance and non-insurance products, the ability of the consumer to easily identify insurance products is compromised. Such ability by the consumer to distinguish between insurance and non-insurance products is critically important because an insurance consumer has rights and protections which a travel service consumer does not have, including, but not limited to insurance consumer protections for sales and claims, oversight insurers and insurance producers by an insurance regulator, ability to file a complaint with the insurance regulators and guaranty fund protection. It is inherently confusing and deceptive to a consumer to bundle products with these consumer rights with products without such rights and protections. The bundling of insurance and non-insurance products is found nowhere else and for good reason. Imagine the following scenarios and consider whether insurance regulators would support these bundled products:   

An auto dealer offers a “Vehicle Assistance Plan,” which includes insurance (say, required liability coverage or credit insurance) and non-insurance (say, extended warranty and vacation planning). A rental car counter agent sells a “Rental Car Assistance Plan,” which includes insurance (say, personal liability or personal injury protection) and non-insurance (say, damage waiver and EZPass toll reader. A furniture store financing a purchase sells a “Furniture Assistance Plan,” which includes insurance (say, credit life insurance) and non-insurance products (say, debt suspension for family leave and a concierge service to answer questions about cleaning and using your new couch.)

To further illustrate the deceptive nature of the bundled product, consider the following from an airline website ticket purchase: This airline website (like others) requires a decision on “Trip Insurance.” Here is the presentation on the web site page:

CEJ, Jost Comments C on Draft D NAIC Trravel Insurancee Model Law December 5, 2016 Page 2

Trip Insurance

Washing gton trip prottection All thesee benefits forr a fraction of o the ticket cost c ( dot ind dicatesRequired) Add Trip p Insurancee? , required d. Yes, prottect my $100 0.10 trip for a total of $2 21.88. Reecommendeed Includes trip cancellaation, trip intterruption, trravel and baaggage delayy, emergencyy medical, annd more. “It's a sm mart idea to consider c inveesting in trav vel insurancee." – U.S. News & Worlld Report, O Oct 2015 , required d. No, I und derstand by declining d coverage I am responsiblee for all canccellation feess and expensses. ,required d. Terms, conditions an nd exclusionss apply. See coverage deetails(about ttrip protectioon). Link oppens external site in new window. w . Review Period: P Receeive a refund d on your preemium withiin 10 days off purchase, ddepending on your statee of residencce, if you decide to cancel your coveerage and yoou have not ffiled a claim m or departed on your trip p. This insu urance is offeered by a thiird party, Alllianz Globall Assistance,, not Americcan Airlines.. Plans und derwritten by y Jefferson Insurance I Co ompany or B BCS Insurannce Companyy. Recommeended by AGA Service Com mpany, the licensed prod ducer and addministrator of this plan.

When yo ou then click k on “details,” the producct is now callled “Travel Protection” and bundless insurancee and non-in nsurance prod ducts.

CEJ, Jost Comments C on Draft D NAIC Trravel Insurancee Model Law December 5, 2016 Page 3

Trip Pro otection Pricing - 6.25% of yo our total tick ket cost and service s fees** Benefit Coverage C (p per person) Trip Can ncellation/Intterruption Reecoup your nonn refundable trip costs if you have to cancel or interrupt your trip forr a covered reason. r

Upp to trip costt (min $350 max $3,0000)

Emergen ncy Medical / Dental Pay ys for the cosst of treatmentt associated with a medical or dentall emergenccy incurred while w traveliing.

$110,000

Emergen ncy Medical Transportatiion Arrangess medical transportatio t on for a patieent to an app propriate $550,000 medical facility f or to o return homee for care. Travel Delay Providees reimburseement for meeals and $5500 (max $150/day) accommo odations wheen a trip is delayed. d Baggage Delay Proviides reimburrsement for clothing, toiletries an nd other esseential items if i luggage is i delayed fo or at least 24 4 hours.

$5500

24-hour Hotline H Prov vides the trav veler with a broad range of services in the t event of a travel or medical m emergenccy including g: medical reeferral and Inncluded monitorin ng, legal asssistance, arraangement of medical evacuatio ons or repatrriations and pre-trip p assisstance. Concierg ge Provides information i about your destinatio on before yo ou travel and d can help yo ou select Inncluded restauran nts, reserve golf g tee timess or secure tiickets to local events. e The coveerages listed above are su ubject to terrms, conditioons, exclusiions, and ourr purchase agreemeent. * The miinimum coveerage per perrson is $350 0. A trip that costs more tthan $3,000 per person w will qualify fo or only $3,000 of coveraage. Refund Period: P Receive a refund d on your preemium withinn 10 days off purchase iff you decide to cancel yo our coveragee and you haave not filed a claim or ddeparted on yyour trip. Existing Medical Con nditions: Pleease note this plan excluudes coveragge for existinng medical condition ns. Refer to terms, t cond ditions and exclusions e fo for more detaails.

CEJ, Jost Comments on Draft NAIC Travel Insurance Model Law December 5, 2016 Page 4

It is unclear what services are or are not insurance and this product is relatively well presented. The opportunity for deceptive presentation is great. Consumers’ understanding and response to the terms “insurance,” “protection,” and “assistance” are different. We suggest that industry assertions that consumer demand a bundled product are self-serving. It would not be confusing or burdensome to consumers to see two products – Travel Insurance and Travel Assistance – and to choose one or both products as fits the consumers’ needs. Separation of the insurance and non-insurance products benefits all parties. It benefits consumers by clearly delineating between insurance and non-insurance products and by providing consumer choice. It benefits industry and regulators by clearly delineating the products subject to insurance regulatory oversight. Definition of Travel Insurance The proposed NAIC Model defines health insurance as follows: C. “Travel Insurance” means insurance coverage for personal risks incident to planned travel, including but not limited to: 1. interruption or cancellation of trip or event; 2. loss of baggage or personal effects; 3. damages to accommodations or rental vehicles; or 4. sickness, accident, disability or death occurring during travel. Travel insurance does not include major medical plans, which provide comprehensive medical protection for travelers with trips lasting six (6) months or longer, including for example, those working overseas as an ex-patriot or military personnel being deployed. This is similar but not identical to a definition found in recently promulgated federal regulations at 26 C.F.R. 54.9801-2; 29 C.F.R. 2590.701-2; and 45 C.F.R. 144.103, which are effective December 31, 2016: Travel insurance means insurance coverage for personal risks incident to planned travel, which may include, but is not limited to, interruption or cancellation of trip or event, loss of baggage or personal effects, damages to accommodations or rental vehicles, and sickness, accident, disability, or death occurring during travel, provided that the health benefits are not offered on a stand-alone basis and are incidental to other coverage. For this purpose, the term travel insurance does not include major medical plans that provide comprehensive medical protection for travelers with trips lasting 6 months or longer, including, for example, those working overseas as an expatriate or military personnel being deployed. The bolded text represents a significant variation between the federal and NCOIL definition. This text should be added to any state laws governing travel insurance.

CEJ, Jost Comments on Draft NAIC Travel Insurance Model Law December 5, 2016 Page 5

Product Filing and Review There are two principal types of travel insurance markets – direct to consumer/aggregator websites and sales by third-party travel organizations, like airlines, travel agents and cruise lines. The latter is inherently non-competitive, in the same way that consumer credit insurance markets are non-competitive because of reverse competition. Consequently, we suggest the following: 

Required filing and prior approval of travel insurance policy forms. Such review and approval is essential to ensure the products are not deceptive or abusive. This is particularly important for a product like travel insurance which is an adjunct purchase to a larger purchase.



Require filing and prior approval of travel insurance rates if sold by a third-party and require filing of rates, if sold by the insurer direct to the public (or via a web aggregator) – all subject to the not excessive, not inadequate, not unfairly discriminatory standards. The sales-by-third-party market is not a competitive market and review of rates is required. The direct-to-consumer market can be a competitive market so review of rates may not be required. The entire section “Competitive Market” should be deleted as irrelevant and unnecessary. The sections on rates describe rate standards in detail, but simply state rates must be filed before use. This section should specify the procedures for prior approval of rates for travel insurance sold through a third-party/limited lines producer (e.g. 30 to 60 days for review by the Commissioner) and procedures for file and use rates for travel insurance sold directly to the consumer (e.g., rates must be filed at least 30 days before use).



Establish a separate line of business for travel insurance and do not lump it with inland marine. Just as a travel insurance producer requires a separate license from other types of producers, so does travel insurance require a separate line of business defined in the model and subject to the filing requirements of the model. By lumping travel insurance into inland marine, the model risks having inland marine filing requirements – typically very limited and not uniform across the states – supersede any filing requirements in the model.



As noted above, delete the section on “Competitive Market” as well as Section 8 “Travel Protection Plans.” Section 8 allows bundled insurance and non-insurance products unless there is a finding that the market is non-competitive. The process of determining whether a market is or is not competitive pursuant to Section 6 and further findings pursuant to Section 8 are cumbersome and unnecessary. This cumbersome infrastructure is being proposed simply to accommodate industry’s desire to sell the inherently deceptive bundled insurance and non-insurance product. By separating the insurance and noninsurance products, Sections 6 and 8 are not needed and a simple, more uniform regulatory structure is possible.

CEJ, Jost Comments on Draft NAIC Travel Insurance Model Law December 5, 2016 Page 6

Sales Practices We support the consumer protections in Section 9. We also ask the working group to consider the following issues. At this point, we are not recommending these actions, but want to discuss them with the working group.  

Whether requiring an affirmative decision on “travel insurance,” as is the practice on airline websites, is a reasonable practice. Whether certain sales – say, for low-cost trips for which some or most of the benefits would not be available or needed – should be prohibited.

We look forward to the discussion in Miami next week. Thank you for your consideration.

To:

NAIC Travel Insurance (C) Working Group

From:

Greg Mitchell

Date:

December 5, 2016

Re:

Preliminary Comments for December 10 Meeting

Dear Commissioner Dowling and Members of the Working Group: We write today to thank the Working Group for its announced plans to take up discussion of the recent proposed amendments to the National Conference of Insurance Legislators (NCOIL) Limited Lines Travel Insurance Model Law put forth at the NCOIL Annual Meeting last month in Las Vegas. We appreciate the Working Group’s prompt attention to these fast-moving developments in the travel protection space. The Tourism and Travel Industry Consumer Coalition (“Coalition”) is an industry nonprofit organization representing interests of the tourism and travel industry. The Coalition believes the current challenges facing industry participants, consumers, regulators, and legislators are all predicated on the unique nature of travel protection products, their non-traditional distribution method, and the lack of clear guidance to date. For historical perspective, travel protection coverage has “grown up” as, and is still largely filed and approved as inland marine insurance1, but the reality is that modern risks consumers face and coverages they seek do not neatly fit the definition of inland marine.2 The varied nature of the risks, the consumer driven evolution of the products offered, and the lack of regulatory clarity has given rise to divergent and contradictory treatment of products3, sometimes even within individual insurance departments. While piecemeal efforts have been made over the past two decades to address some of the regulatory confusion through NAIC licensing guidelines (ULS #34) and the NCOIL Limited Lines Model Law (11/2012), we believe the time is right for the NAIC, NCOIL, our Coalition, and other interested

SERFF Uniform Property & Casualty Product Code 9.0009. “Covers financial loss due to trip cancellation/interruption; lost or damaged baggage; trip or baggage delays; missed connections and/or changes in itinerary; and casualty losses due to rental vehicle damage.”. 2 The NAIC’s Model Nationwide Inland Marine Definition (MDL-701) was last amended in 1977. See Attachment A: Inland Marine Definition 3 In recent years, some states are reviewing travel insurance products as both property and casualty and accident and health. See Attachment B: Uniform Property & Casualty Coding Matrix, see also Attachment C: Uniform Life, Accident & Health, Annuity and Credit Product Coding Matrix. 1

1

parties to come together and develop a more comprehensive, long-term solution to such an important element of our economy and non-insurance related industries. The good news is that we believe the aforementioned challenges can all be overcome by developing fair, workable, flexible, industry-wide laws and regulations that address current confusion and eliminate it moving forward. These laws must provide regulators the necessary authority for consumer protection while also promoting a healthy and competitive marketplace for the travel protection products consumers demand, which are essential to the continued growth of the broader tourism industry.4 Such laws and regulations should also strive for uniform treatment and clear compliance standards not only in filings, but in licensing, claims adjudication, and how jurisdictional issues are addressed. Also important is the reliable application of these laws – the current lack of consistent treatment creates immense regulatory risk, which hurts consumers by making travel protection products less available and less affordable. We have attached a brief summary of the Amendments that have been offered to the NCOIL Model.5 While they are an outstanding step in the right direction, we wish to be clear that enacting them would not immediately solve all the challenges in the travel insurance regulatory sphere. Additional amendments may be necessary over time as carriers continue to innovate in their efforts to keep up with evolving consumer demands. We look forward to providing more specific comments regarding the Amendments to the NCOIL model during our presentation at the Working Group meeting in Miami, and we will be happy to follow up with additional written comments or presentations to address any questions raised during the session. We thank the Working Group for a productive dialogue since its formation, and we hope to sustain that as we work with you and your legislative colleagues form NCOIL in the interest of developing a final product that provides genuinely workable clarity for the industry, for regulators, and most importantly for consumers who like and benefit from the peace of mind travel protection products and services provide. FIRM.Insurance Service Team 4816-0857-7341v5

The U.S. Travel Association reports that 2.7% of the Nation’s GDP and 1 of every 9 jobs depend on tourism and travel. 5 See Attachment D: Summary of Proposed Amendment to Travel Insurance Model Act. 4

2

NAIC documents labeled attachment A, B and C and referenced in the footnote of the TTICC’s cover letter were not included in the materials.

SUMMARY OF PROPOSED AMENDMENT TO THE TRAVEL INSURANCE MODEL ACT November 22, 2016 I.

Introduction

Tourism and travel protection products protect consumers and foster economic growth for all segments of the diverse tourism industry. While travel protections began as trip or baggage protection, which was initially subject to “inland marine” regulatory requirements—covering losses associated with property and materials in transit—now, with the evolution of consumer demand and the continuing evolution of the available opportunities in travel and tourism, an update to the regulatory structure is appropriate. These products, which the National Association of Insurance Commissioners has described as unique due to their transient nature and global application, provide consumers with diverse protections and benefits that cross multiple lines of insurance and non-insurance products and services. The unique and necessary nature of travel protection products has given rise to the need for a uniform approach to regulating these products across state and national boundaries. This approach is intended to provide for enhanced consumer protection by tailoring the necessary regulation to the nature of the products being offered, and in turn allows for significant economic growth by creating a path to compliance for the insurers offering these valuable products in response to an ever-evolving consumer demand and the continued evolution of travel and tourism. The Proposed Amendment to the Travel Insurance Model Act (“Proposed Amendment”) has been drafted with the goal to meet these needs by providing a uniform regulatory structure for travel protection products. This document provides a summary of the Proposed Amendment. II.

Scope and Purpose of the Proposed Amendment

The Proposed Amendment’s purpose is to create a comprehensive legal framework to permit and regulate the sale of travel protection products in adopting states, while protecting consumers by encouraging fair and effective competition in the market. The Proposed Amendment:   

Expands on the prior model act that was intended to address licensing and establish a clear regulatory framework for the development and distribution of travel protection products. Encourages innovation in the marketing and development of travel protection products, providing value to consumers and helping support the tourism industry—a major economic driver. Preserves the unique distribution channels utilized by travel protection products that have been developed to meet consumer demand, while protecting consumers and fostering an opportunity for compliance through a clear regulatory environment.

The Proposed Amendment applies to:  

III.

Travel Insurance, whether or not that insurance is offered as part of a consumer’s Travel Protection Plan. Excludes from its scope Cancellation Fee Waivers and Travel Assistance Services— which are not insurance—except where the Proposed Amendment specifically provides otherwise.

Clear Definitions of Travel Insurance and Related Products

To provide clarity in the regulatory environment, the Proposed Amendment defines Travel Insurance and related terms: 

IV.

Licensing and Registration of Travel Insurance Producers and Travel Retailers 

V.

Draws a clear distinction between Travel Insurance and products and services that are not insurance, such as Cancellation Fee Waivers and Travel Assistance Services.

Provides for minor technical adjustments to the prior provisions to obtain a Limited Lines Travel Insurance Producer License and includes incorporation of a Travel Administrator. A new defined term.

Premium Tax

Under the Proposed Amendment: 



VI.

Travel insurers are required to pay premium tax on Travel Insurance premiums paid by individual policyholders who are residents of the adopting state; certificate holders who are residents of the adopting state and who elect coverage under a Group Travel Insurance Policy; or Eligible Groups that are a resident in, or have their principal place of business in the adopting state and purchase a Blanket Travel Insurance Policy. Requires insurers to obtain and maintain the information necessary to determine the proper state to which premium tax should be reported and paid.

Competitive Market

The Proposed Amendment seeks to benefit consumers by encouraging fair and effective competition in the marketplace.   VII.

Presumes that there is a competitive market for Travel Insurance, but empowers the DOI to find otherwise and make a ruling to that effect. Sets out relevant factors for the DOI to consider in making this decision.

Forms, Filing, and Rates

Currently, there is little guidance on how travel protection products should be filed. Some states require filing as property and casualty (“P&C”) or inland marine, while others require filing under an accident and health (“A&H”) line of authority. This is problematic because often Travel 2

Insurance does not fit neatly into one of these categories, and where it is required to be filed as P&C, often cannot be offered on a group basis. The Proposed Amendment provides uniformity and clarity for filing requirements:    VIII.

Establishes that Travel Insurance is classified as and filed under an inland marine line of insurance, and defines inland marine to include Travel Insurance. Requires that all policies, certificates of insurance, endorsements, riders and rates be filed with the Department of Insurance (“DOI”) thirty (30) days before being used. Prohibits rates that are excessive, inadequate, or unfairly discriminatory.

Travel Protection Plans

Travel Insurance grew out of non-insurance Travel Assistance Services. As a result, consumers benefit from a producer’s ability to bundle insurance and non-insurance services together in the travel context. 

   

IX.

Sales Practices and Marketing      

X.

Permits Travel Protection Plans, which may include both insurance and non-insurance products and services, such as Travel Insurance (an insurance product) and Travel Assistance Services or Cancellation Fee Waivers (non-insurance products) to be offered for one price in a state so long as certain conditions are met. Prohibits offering Travel Protection Plans for one price where the DOI has found that the market is non-competitive or that the Travel Protection Plan restricts competition. Requires that insurance and non-insurance products and services be clearly delineated in the Travel Protection Plan’s fulfillment materials. Fulfillment materials must also disclose to the customer at the time of purchase that the Travel Protection Plan includes Travel Insurance, Travel Assistance Services (noninsurance), and a Cancellation Fee Waiver (non-insurance), where applicable. Requires that the customer be provided the opportunity to obtain additional information regarding each of these components and their pricing.

Subjects all sales of Travel Insurance to the adopting state’s Unfair Trade Practices Act. Makes it an unfair trade practice to sell an illusory Travel Insurance policy. Prohibits sellers from offering Travel Insurance or Travel Protection Plans on an optout basis. Requires that all marketing materials be consistent with Travel Insurance policy documents. Requires clear disclosures of any pre-existing condition exclusions. Requires ten (10) day free-look period to cancel the policy for a full refund (so long as the trip has not started).

Travel Administrator Licensing

The Proposed Amendment sets out a framework for regulating Travel Administrators. 3

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XI.

Administrator Audits 

XII.

Expressly provides that Travel Insurance may be offered under an individual policy or under a group or master policy.

Responsibility 

XV.

Provides that where a Travel Retailer whose insurance related activities are limited to offering and disseminating insurance is registered in accordance with the Proposed Amendment, the Travel Producer is authorized to offer and disseminate that Travel Insurance and to receive related compensation.

Policy 

XIV.

Provides for semiannual audits of Travel Administrators that administer benefits in connection with Travel Insurance for more than one hundred certificate-holders, subscribers, claimants, or policyholders on behalf of an insurer.

Registration 

XIII.

Requires Travel Administrators to be licensed under the Act or as a third party administrator or managing general agent and sets out the documentation and information required for applying for licensure and records required to be produced for inspection by the DOI. Provides conditions under which the DOI is empowered to deny, suspend, or revoke a Travel Administrator’s license.

Provides that the Limited Lines Travel Insurance Producer is responsible for the acts of the Travel Retailer and requires the Producer to use reasonable efforts to ensure the Travel Retailer’s compliance with the Act.

Enforcement   

Empowers the DOI to protect consumers by allowing the DOI to conduct investigations or examinations of travel insurers, Travel Insurance Producers, Travel Retailers, and Travel Administrators and to enforce the provisions of the Proposed Amendment. Permits the DOI to take appropriate action following notice and hearing to protect consumers of Travel Insurance in the adopting state. Empowers the DOI to assess a civil or administrative penalty not to exceed $10,000 per type of violation to a person found to be in violation of the Act.

GEM/FBT 0132277.0630201 4835-4936-7868v6

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John P. Fielding 202 429 6296 [email protected] 1330 Connecticut Avenue, NW Washington, DC 20036-1795 202 429 3000 main www.steptoe.com

December 6, 2016 National Association of Insurance Commissioners Attn: Denise Matthews 1100 Walnut Street Suite 1500 Kansas City, MO 64106-2197 Dear Director Dowling and Working Group Members: On behalf of the U.S. Travel Insurance Association (“UStiA”) and its members, we would like to thank you for this opportunity to offer preliminary comments on the proposed amendments to National Conference of Insurance Legislator’s (“NCOIL”) Travel Insurance Model Act (“Model”). As revised, the Model amends NCOIL’s existing Limited Lines Travel Insurance Model Act, which is based on the NAIC’s Uniform Licensing Standard 34 and has been adopted by forty-three states and the District of Columbia—NCOIL’s most widely-enacted model to date. UStiA believes that NCOIL’s Model provides a strong starting point and basis for discussion as this Working Group pursues its charge to establish an appropriate regulatory framework for the travel insurance industry. At the outset, we want to thank the Working Group for its work to date and for its continuing efforts to explore and promote fair, uniform, forward-looking standards for our industry. This is a vital issue for our industry and we commend the Working Group and NCOIL for their collaboration on, and commitment to, this project. We recognize that the Working Group’s consideration of the NCOIL Model will be a deliberate and thoughtful process, and we want to express our sincere interest in, and enthusiasm for, participating in future discussions with the Working Group and other stakeholders. Below, we have included brief discussion of: (1) the unique features of the travel insurance industry, which warrant a tailored, travel-specific regulatory framework; (2) the desirability of, and need for, a collaborative NAIC-NCOIL travel insurance model; and (3) our initial thoughts on the contents and structure of the NCOIL Model.

I.

Unique Features of the Travel Insurance Industry Warrant Tailored Regulatory Solutions.

By way of background, the UStiA is a national association of insurance carriers, third-party administrators, and related businesses involved in the development, administration and marketing of travel protection products. Our membership represents 90% of the travel insurance marketplace. Our mission is to ensure that travelers have affordable access to travel protection and assistance, foster ethical and professional standards of industry conduct, cultivate effective state and federal government relations, inform and assist our members, and educate consumers about travel insurance and related issues. The travel insurance industry has multiple distinguishing hallmarks vis-à-vis other lines of insurance. Travel protection products include market-driven insurance coverage and noninsurance services that address the numerous risks and needs consumers face while traveling. Notably, these products:     

are highly discretionary and non-mandatory in the U.S.; are typically short-term and non-renewable; have global application; include benefits and protections across multiple lines of insurance and non-insurance services; and are not individually underwritten (that is, “take all comers”).

Ultimately, these industry dynamics favor consumers. To be viable in this market, our members must be sensitive to, and successful at, meeting consumer expectations. Thus, travel protection products are low-cost and high-service. And consumer demand for our products is increasing, with take-up rates growing consistently and continuously over the past thirty years. Additionally, our industry has very low consumer complaint rates. According to 2014 industry data, our complaint rate is 0.0045% (approximately one complaint filed with departments of insurance for every 22,000 plans sold). The NAIC’s own aggregate consumer complaint report for 2016 indicates that there were 35, 83, 207, and 96 confirmed consumer complaints countrywide for travel in 2013, 2014, 2015, and 2016, respectively. Importantly, because of the highly discretionary nature of travel insurance, the easiest way for consumers to express their dissatisfaction with our products is to not purchase them at all. But, as noted above, consumers are buying more, not fewer, of our products. Further, the composition and marketing of travel protection products has evolved in response to traveler needs and wants. Bundling of travel insurance with non-insurance assistance services— the common practice today—grew organically out of market demands. Specifically, it became evident that insurance-only products offered on an a-la-carte basis left certain gaps in consumers’ experience and overall travel protection. Non-insurance services encompass a broad range of

possible assistance, including, for instance, travel planning, event booking, emergency money transfers from home, translation and other business services, help with legal referrals, and pretrip information regarding visas, currency and the like—basically designed to help consumers with the services they need when they need it. To meet consumer’s expectations for this type of assistance, the industry has adapted to provide these types of services along with the insurance component in a comprehensive, seamless protection package. Numerous distribution channels (e.g., travel agents, tour operators, credit cards, etc.) and the growth of direct online distribution (e.g., airline websites, insuremytrip.com, etc.) for travel insurance also have forced providers to ensure they provide the products their customer want, or they will lose them to their competitors. And indeed, the industry is marked by vigorous competition, with a steady stream of new market entrants. There is a wide choice of providers, each with the ability to compete and offer products that are responsive to consumer needs. There are dozens of suppliers and, as noted above, numerous outlets through which consumers can access these products. Again, consumers are the winners under these market dynamics through development and offering of better coverages and packages at competitive prices. II.

Collaborative Development of a Travel-Specific Model by the NAIC and NCOIL is the Best Path Forward for All Stakeholders.

UStiA believes strongly that a comprehensive travel insurance model act is necessary and would greatly benefit regulators, consumers, carriers, and other industry participants. As outlined above, our industry has unique features, which have developed over the last decades—largely in response to changing consumer needs and demands. It can be challenging to reconcile the current features of our industry with existing laws and rules, which have been developed, designed and interpreted for major lines of authority that operate and are distributed differently from travel insurance. Current legal and regulatory structures lack travel-specific clarity and certainty for regulators, industry, and consumers. Development of a model could provide such clarity for the benefit of all stakeholders. Lack of regulatory clarity poses dangers for industry and consumers, and may lead to, among other things: differing and/or shifting consumer protections, higher costs for consumers, and lack of parity in the marketplace due to uneven policies and enforcement. And of course, an uncertain regulatory environment stifles innovation in the marketplace and makes products less responsive to evolving consumer needs and demands. Development and implementation of a regulatory framework for travel protection products, on the other hand, would have clear benefits, including:   

Providing consumers with clear and consistent protections; Reinforcing and clarifying regulatory authority to protect consumers and ensure the marketplace operates fairly; Simplifying multistate compliance issues for industry and reducing costs; and

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Preserving the positive features in today’s marketplace (i.e., pro-consumer, competitive, etc.).

The best way to address the challenges currently facing all stakeholders in the travel insurance industry (and avoid attendant negative consequences) is to develop a uniform and level playing field going forward—precisely what an NAIC-NCOIL model would accomplish. Indeed, there are several strong arguments in favor of collaborative development of a travel model by NCOIL and the NAIC. Generally, a model law is the most efficient and fair path for crafting forward-looking uniform standards that will impact an entire industry. The model drafting process at the NAIC and NCOIL is open and transparent, and promotes formulation of well-informed and workable solutions. Moreover, a travel-specific model is warranted because of the unique features of travel products (e.g., highly discretionary, low-cost, short-term, nonrenewable, no individual underwriting, take-all-comers, competitive marketplace, very low consumer complaint rates, etc.) and the ultimate need for a tailored regulatory approach. And finally, a collaborative effort between the NAIC and NCOIL will draw on the combined expertise of legislators and regulators, and contribute efficiencies to the adoption process after drafting is complete. III.

The NCOIL Model is a Strong Starting Point for Development of a ForwardLooking Regulatory Framework.

UStiA supports the NCOIL Model as a strong starting point for the Working Group. The draft NCOIL Model presents multiple advantages as a basis for the Working Group’s discussions regarding a workable travel insurance regulatory framework. First, the Model addresses several important regulatory issues with respect to travel insurance, including: definitions, licensing and registration (upon which, under NCOIL’s current model, the vast majority of states have already achieved a level of uniformity), premium taxes, competition in the market, forms and rates, group and blanket travel protection plans, general sales practices, administrator licensure and audits, and enforcement. Today, our industry faces unique compliance challenges in all of these areas. An effective forward-looking framework for the industry, therefore, requires clear rules and standards in each of them. The NCOIL Model includes proposed solutions to numerous regulatory uncertainties and challenges facing the industry today. It provides, among other things:   

Clear and uniform definitions of key terms, including what constitutes travel insurance and what does not; Rules for the proper payment of premium taxes and related documentation/recordkeeping obligations for insurers; Clarity that travel insurance should be filed as an inland marine line of insurance under a “file and use” approach;

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Authorization for bundled travel protection products that include insurance and noninsurance components to be sold in competitive markets, provided that those products satisfy certain requirements, including consumer notice obligations; and Uniform licensure and audit requirements for travel administrators.

Second, the NCOIL Model builds upon its earlier, highly-successful travel producer licensing model, which was adapted from the NAIC’s Uniform Licensing Standard #34 (the ULS). The motivation for the ULS and the original NCOIL model arose from the same types of multistate regulatory challenges and uncertainties that exist for the industry today. Prior to adoption of the ULS/original model, for example, it was impossible for travel producers to get licensed in certain states at the same time and there were general concerns regarding potential holes in consumer protection and regulators’ authority over producers. The ULS/ model addressed those problems, as evidenced, at least in part, by today’s low consumer complaint rates and growing consumer demand. Third, the contents of the NCOIL Model are drawn—in several instances—from existing NAIC models (and then adapted for the travel insurance space). For example:  

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The Model’s language in Section 7 (Forms and Rates) regarding filings and rates follows the NAIC Property and Casualty Model Rating Law (File and Use Version) (GDL-1775); Section 10 of the NCOIL Model on Travel Administrator Licenses, as well as Section 11 on Administrator Audits, are based on the NAIC Third Party Administrator Act (NAIC Guideline Version 1) (GDL-1090); and The Model’s enforcement provisions (Section 15) are derived from the NAIC Service Contracts Model Act (NAIC Model Law #685).

In other instances where the NCOIL Model does not follow a NAIC model, the Model language can be tracked to existing state laws and guidance. In sum, the Model is built largely upon existing concepts, policies, laws, and regulations tweaked to work for travel insurance, and thus provides a workable, common-sense basis from which the Working Group can continue its work in this area. IV.

Conclusion

In sum, the travel insurance industry is unique and does not fit neatly within existing laws and regulations designed for more traditional (and in many cases, required and renewable) insurance coverages. Development and implementation of a fair, uniform, forward-looking regulatory framework, while maintaining the market’s consumer-oriented market based features, is vital for our industry. The NCOIL Model provides a solid starting point for the creation of a tailored approach that will aid compliance and enforcement efforts, and bring clarity to industry participants, regulators, and consumers. The UStiA strongly supports collaboration between the NAIC and NCOIL in developing a travel insurance model, particularly because of the open and

transparent processes through which both organizations contemplate and develop legal and regulatory standards. UStiA looks forward to participating in this process and being a resource for the Working Group as you engage in more detailed discussions about the NCOIL Model. We understand these are complex issues and that any model will have a tremendous impact on our industry and consumers—so, we need to get it right. We and others will be studying and evaluating the NCOIL Model language closely, in light of the above-referenced industry challenges and objectives, and look forward to further opportunities to present detailed comments and analysis. Again, we very much appreciate the work that the Working Group has done so far and this opportunity to offer preliminary comments. Please do not hesitate to contact me if you have any questions or if we can provide any further information. Sincerely,

John Fielding Counsel U.S. Travel Insurance Association