Selling Travel Insurance: Difficult but Worth It

by Barbara Peterson January 07, 2015

Travel insurance can be a difficult topic to broach when selling a client that quintessential dream trip.

Instead of visions of paradise, travel agents might find themselves talking about “riots and revolution,” said Jennifer Wilson-Buttigieg, co-president of Valerie Wilson Travel, a Virtuoso agency, in New York City.

Yet dramatic world crises and unforeseen medical emergencies have lately reinforced the wisdom of purchasing travel insurance.

Given the range of things that can go wrong, “we ask customers to sign a waiver if they are going to decline it,” said Wilson-Buttigieg.

Last year alone, events ranging from the Russian incursion into Ukraine to riots in Hong Kong – not to mention the Ebola health scare – boosted interest in travel insurance.

In fact, travel insurance sales are up. Wilson-Buttigieg reported that her agency saw a 10% growth in this segment in the past year.

ASTA’s surveys confirm this perception: more than half of agencies reported that insurance sales rose in the first half of 2014.

In fact, sales have been trending upward for several years, according to the U.S. Travel Insurance Association (USTiA). In its most recent two-year survey of the industry, UStiA said sales by travel agencies and other suppliers like airlines, rose by 11% from 2010 to 2012.

Good advice
One of Wilson-Buttigieg’s clients recently learned, on the eve of his departure for an important event in Hong Kong, that demonstrators “literally had blocked their way to the meeting” which was, understandably, postponed, she said.

The client was able to recoup most of the deposit and apply it to a future trip under the cancellation and interruption policy he had been advised to purchase, she added.

For that reason, Wilson-Buttigieg said she’s eager for New York and 18 other states plus the District of Columbia to join the rest of the country in adopting a uniform law that would permit travel agencies to sell trip insurance without being fully licensed with the insurance commissioner.

Hassles abound . . .
For a large agency like Valerie Wilson, with 300 employees in 16 offices in different states, the patchwork of differing state rules can add expenses and hassles to an agent’s workload.

“We need to have someone who is licensed in each of the states; it makes it more complicated,” she said.

ASTA, in fact, has estimated the cost of staying in compliance with insurance regulators in all states, at more than $40,000 a year.

. . . but it’s worth it
But many agents believe the hassle and red tape involved with keeping up with licensing rules is well worth it given the potential revenue from selling travel insurance.

“McDonalds doesn’t make money on hamburgers, it makes money on French fries,” quipped Rick Ardis, head of Ardis Travel in East Rutherford, N.J.

“By adding components, be it sightseeing or insurance, you increase the amount of money you make on a booking,” he said although persuading customers that they need to purchase yet another ancillary product will always be a challenge.

“More and more, people understand why they should buy it,” said Ardis. “But there will always be that person who will say ‘I don’t need that, I’m not going to get hit by a bus.’”

Still convincing those reluctant clients to buy protection is worth your time, said Wilson-Buttigieg. “It’s a great opportunity to make some significant money.”

High commission potential
Terry Regan, CTC, president of Berkeley’s Northside Travel, in Berkeley, Calif., a Travel Leaders agency, said insurance sales may be small in dollar numbers, but the commissions can range from 10% to 30%.

One of Regan’s clients, a man in his eighties, recently bought a package to the Middle East, for $6,000.

It wasn’t difficult to persuade the client to purchase cancellation and emergency medical insurance, which in this case cost an additional $850, said Regan.

For someone younger – say, in their early thirties – the premium for the same package would be about $130, according to Regan.

With a commission of up to 30% on such sales, the remuneration can be considerable, and that’s weighed against Regan’s travel insurance licensing fees which are minimal, he added.

Regan is licensed to sell insurance in California, which two years ago adopted the uniform rules backed by ASTA and the U.S. Travel Insurance Association (USTiA).

If he sells insurance in another state in which he’s not licensed, the insurance company will do it for him.

A challenging sale
Part of what makes insurance a challenge is that the premiums may appear high, more so if the client is older—like Regan’s client—and is embarking on a trip to riskier destination.

Prices are based in part on the same actuarial tables used by insurance companies for other types of policies, and also on the overall cost of the trip.

Travel insurance makes the most sense for clients who are booking high-end tours or cruises that require a substantial advance payment, according to Regan.

“If you are just buying an airline ticket you may not need it,” he said, since airlines typically allow passengers who cancel to rebook at a later date for a change fee.

“But if you are prepaying tour packages, and you get sick and have to cancel, it can be really expensive.”

The exceptions
Another issue is making sure clients understand the exceptions in any policy. And in general, with or without additional insurance, cancelling a trip due to civil unrest in a country “can be very iffy,” said Regan.

Every travel insurance policy has a list of “exclusions”—situations in which coverage is not provided.

These may include, among other things, losses due to war (declared or not), military actions, civil disorder, and riots; losses due to a pre-existing medical condition; extreme, high-risk sports, or poor weather conditions.

Creating good will
Travel insurance, however, can also be an opportunity for agents to create good will.

“Insurance is not only a good revenue source for a travel agency, it can create good will; if you sell insurance to someone and then something happens and they have to cancel, they’ll be grateful they’ve got a way of getting their money back,” Regan said.

It can also work both ways, according to Regan.

One of Regan’s clients recently declined to purchase insurance for a trip to Australia. When he later had to cancel an expensive side trip during the trip, “he lost the money he’d prepaid because he didn’t buy the insurance I had recommended.”

It’s not likely the client will make that mistake in the future, said Regan. “He admitted to me he should have taken my advice.”

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