Insurance VS. Protection Consumer report

[let_them_eatcake]

I just got finished watching the Channel 4 NBC news. There was a report on The Perils of Travel. A older couple bought travel Protection through their TA for their $8,900 cruise. The husband damaged his knee playing golf so they could not go on the Mediterranian Cruise. the doctor recommended knee replacement surgery because he could not walk and was in severe pain. So when they submitted a claim to the travel protection company it was denied as they said it was a elective surgery. With that said, the couple went to the state officials and CFA Consumer Federation of America about the lack of payment on the claim. The officials said that they could not help them becuase what they purchased was not insurance but travel protection, and the official have no jurisdiction if it is not insurance. I will provide the link when and if it is availible. I live in Maryland and I don't know if this protection vs. travel insurance thing is different in other states.

[KroozFoolz]

http://www.nbc4.com/consumer/17173802/detail.html

[let_them_eatcake]

Kroozfool that is it. Thanx

[cruiseco]

It can be confusing as you can't go by the name alone.

 

Many reputable insurers use "travel protection" as part of their name -- CSA Travel Protection, Travelex Travel Protection, and so forth. Actually, for those companies that offer comprehensive package policies "travel protection" is really a better and more accurate description of what the client is purchasing.

 

For example, if you buy a CSA policy many benefits are actual insurance and are backed by a listed underwriter -- the trip cancellation/interruption, medical, CDW, AD&D benefits all fall under this definition. But CSA will also include some non-insurance benefits such as their 24-hour emergency assistance, concierge services, and so forth. So, since the policy is a mix of insurance and non-insurance benefits it's considered by many to be better to use the term "travel protection" when describing the policy. So don't necessarily shy away from a company if you see "travel protection" in their name or the plan information.

 

What the article is talking about is those companies that market a product that's really more along the lines of your AAA towing and road service membership. While most people call it "towing insurance" it isn't insurance at all. Rather than having their services guaranteed by an underwriter, you're betting that the cost of your tow will be covered by the dues collected from the millions of AAA members that pay their dues every year. If that pool of member dues ever dries up there will be no money to pay for your tow.

 

Several companies were selling a similar product -- the possible future risk of having to pay out the money for cancellation claims was supposed to be covered by monies taken in by others buying policies instead of having that risk covered by a deep-pockets underwriter. In theory that will work as long as those policies keep getting sold and there are no huge clams. Once that happens the whole company collapses like any pyramid scheme. Underwriters expect to be paid for assuming the risk of having to cover any claims so there is a financial incentive for these companies to cut out that expense if they don't mind putting their clients at risk. Which apparently they don't.

 

The various state departments of insurance do have some enforcement tools, the biggest is being able to pursue these companies for selling insurance without being registered/licensed. Here a summary of the state of Tennessee's actions against Trip Insured:

 

http://www.state.tn.us/commerce/pdf/press/prdRls090706.pdf