Travel Insurance Licensing is a Mess. Here's What You Should Know.

The truth? Travel insurance licensing is a doozy. While far from experts, we wanted to give a 30,000 foot view on what's happening with travel insurance licensing for travel agents, because it's crazy complex. After that, we'll go over some action steps to protect your agency.

This is a long one, folks. Buckle in.

Please... Don't Hate the Messenger

Well, here's the truth: Your frustration level is probably going to be (much) higher after this article. Don't hate me for that. Knowledge is, er, power... right?

This is one of those somewhat ambiguous situations. As in, there is no one right answer, there are different interpretations of the same law. The insurance industry is slowly making headway, but it's a looooooong process ("long" meaning that the travel insurance industry has been working on it for the better part of 10 years).

Until they get it straightened out, try to accept the ambiguity. Just remember, no matter how frustrated you get, your agency will be better off with this information than operating unaware.

The Problem

When a travel agent offers travel insurance, they aren't—nor should they be—claiming to be an expert on travel insurance. If you are making those claims, giving advice, or specifics of the plans, stop now. Henceforth, it's in everyone's best interest that travel agents are simply offering/recommending a product that would be helpful to their clients.

Travel agents offering travel insurance is a gray area. 

Travel Agencies That Offer Insurance Raises Questions:

• Are travel agents acting as an insurance agent or simply as someone recommending a product?
• Does a travel agent need their own license to sell travel insurance or is an agent under the travel insurance company's license?
• If an agency needs their own travel insurance license, what about hosted agents?  Can they be under their host agency's travel insurance license?
• Do travel agents need an agency license, an individual license, or both?

A Little More Ridiculousness

See how this is complicated? Good, let's complicate things more.

Each state has their own licensing requirements. There is no one federal travel insurance licensing law that all states follow. This non-uniformity leads to serious problems in such an interconnected world.

If an agency is licensed in their state, what if they want to offer insurance to their out of state clients? Do they need a license in every state? ASTA estimates it would cost an average-sized agency nearly $41,000 and take six months to become compliant in all states.

If that doesn't phase you, maybe this well. As of now, sometimes you can't comply... even if you wanted to.

Here's a current real-world example (which hopefully will be fixed soon). In California, they passed NAIC/NCOIL (uniform licensing standards ... more on that later) and ruled travel agencies fall under the travel insurance company's license to sell travel. HOORAY—no need for a travel insurance license for CA agencies!

Er, take that back everybody. Some states require travel insurance licenses from non-resident travel agents. The problem: CA agencies have no way to get a non-resident license in those states because they can't provide a license for their resident state, CA ... because right now, there is no license for travel agencies. They fall under the travel insurance company's license.

And that's the problem(s) we're looking at, you guys. Blech.

The Meeting of the Minds

Last month, I attended the Professional Association of Travel Hosts (PATH) Symposium, where they invited a panel of travel insurance executives to give their expert opinions.

The panel's goal was to make sure hosts were informed in order to take steps to protect themselves and their agents. Side note: this is another reason why I think PATH membership is something you'll want to look for in a host agency.

 The Players to Know

If you're like me and aren't in the know when it comes to insurance industry acronyms, let's get some acronyms taken care of.

• UStiA, US Travel Insurance Association: An association whose goals are to create uniform and fair regulations for the industry; develop consistent licensing standards for agents who market travel insurance and assistance services; and serve as an advocate for the travel insurance industry. They've been working with ASTA to get legislation passed.
• NAIC, National Association of Insurance Commissioners: An association of insurance regulators for all 50 states, DC, and the 5 territories. They came up with their own set of standards for uniform licensing.
• NCOIL, National Conference of Insurance Legislators: An association that helps legislators in Washington make informed decisions on insurance issues. They also came up with their own set of standards for uniform licensing.

The caliber of panelists that spoke shows that this is a top concern for travel insurance companies. As one panelist said,

"The insurance companies will get hit much harder [financially] than hosts or agencies [if found to be non-compliant]. We want to help make sure all agents and hosts are in compliance."

Travel Insurance Panelists:

• Allianz - Richard Aquino, Vice President Field Sales
• Travel Safe - Carlos Cividanes, Executive Vice President of Industry Relations
• iTravel Insure - Bill Dismore, Executive V.P. & COO
• Travel Guard - Bob Ford, Regional Vice President
• Travel Insured - Isaac Cymrot, Vice President, Sales & Industry Relations
• Travelex - Sally Dunlap, VP Risk and Compliance

The end goal for all these players was a uniform licensing law, where travel agents would be able to work under the travel insurance company's umbrella. NCOIL and NAIC's uniform licensing law standards are similar enough now that they've been smashed together and are referred to as NAIC/NCOIL (the Brangelina of the travel insurance licensing world).

Understand This, Young Grasshopper

At the PATH event, the travel insurance companies' answers usually matched, but not always. To my dismay, they never made blanket statements like "You always need a license in Kansas," which is SO much easier to write about. Could it be that hard to just throw me a bone? I was starting to think they were sent to torture me. Turns out they weren't. Let me explain why:

• First off, we know that it's all about interpretation. Their legal/compliance departments interpret the licensing laws differently.
• Secondly, the travel insurance companies' products are filed differently in different states. Because of this and the other variables (remember that list of bulleted questions?), every situation is different.
• Lastly, state regulations have been rapidly changing. What was true yesterday may not be true today. My great idea of a flow chart would be out-of-date as soon as it went to print.

At the end of this article, you will probably be in a similar head space to me at the end of the meeting. My question for the panel during the Q&A? "So.... could you go over all that again?"

States and Provinces of Note

Side note: It's worth mentioning our Seller of Travel laws article goes hand-in-hand with all this licensing fun. Don't despair—in my opinion—seller of travel laws are (somewhat) more clear cut than travel insurance licensing.

Now, back to travel insurance licensing. Canadian agents, it's just Saskatchewan and B.C. that require travel insurance licensing.

While numerous U.S. states require non-resident sellers get an out-of-state license to offer travel insurance to their residents, only NY, WA and TX are actively enforcing. Toss WY in there too, but know that not all of the travel insurance companies agree on that one.

Remember NAIC/NCOIL (Brangelina) I mentioned earlier? As of May, quite few states adopted that uniform licensing law (either partially or fully)—Alabama, Alaska, Arkansas, California, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Minnesota, Missouri, Montana, New Mexico, Virginia, Washington, and Wyoming.

Although - to continue with our theme of confusion and frustration - CA is the only state that is actively implementing these standards. Apparently, passing legislation and actually acting on it are two separate things.

Correction 7/2/2013: While many states have implemented the NAIC/NCOIL model, California is one that partially implemented it, doing a few tweaks of their own before implementing. It had some unintended consequences for agencies. California ended up completely getting rid of the agency license for travel insurance for California travel agencies. Great in theory, not so much in reality. It means that California agencies can't get non-resident licenses to sell insurance in other states because they have no license for their state. Whoops.

As a reminder, things are rapidly changing, and these standards pass and fail all the time (Arizona voted no on NAIC/NCOIL just a few days ago).

Action Steps

So, what can you do to set your mind at ease? Here's some recommendations:

• Call the licensing department: This is the most important step and will make sure you're licensed properly where you need to be. Choose your preferred insurance companies (small agencies may want to select only one). Work with their licensing department to make sure your agency is compliant. To get ahold of the licensing departments, contact your host agency, insurance company's BDM, or check out UStiA's website. Note: The travel insurance companies may cover the cost of licensing in your state(s).

"Our licensing department has tripled in size the past few years compared to the sales department."

• Become a member of ASTA: ASTA has been a lobbying with the UStiA, NAIC, and NCOIL to pass legislation. They issue valuable member alerts and updates on what's happening with the the travel insurance deregulation. BUT, this info (and loads of other valuable information) can only be accessed by members.
• Recommend, don't sell: When communicating (verbal or written) with clients, offer/recommend travel insurance; do not sell travel insurance.
• Trip Details Confirmation Form: After you recommend travel insurance, give yourself a peace of mind by leaving an e-paper trail that indicates you offered your client travel insurance. 
• Watch out for NY, WA, TX: (and maybe WY): If you sell insurance to clients in those states but don't live there, look into getting licensed there. These are the states that require licenses for non-resident sellers and are enforcing it with fines (fines).
• Email quotes through vendor site: The panelists recommended this because that way the quote is coming on behalf of the insurance company. Also a good idea because it leaves a paper trace that you offered travel insurance.
• Refer clients back to insurance company: Insurance is tricky stuff and you'll never want to be playing the expert. When your client has insurance-related questions, refer them to the experts at the travel insurance company.
• Perspective: It's easy to be overwhelmed. Remember to keep things in perspective. First, call your licensing department and get a license for your state. Bam, you're done and you're covered. Then, if you're worried about all the other state licenses, remember how many out-of-state clients you actually have. For most agencies, it's not many. You take small risks every day in your business, this may be more confusing than others, but it's a small risk none-the-less.

Further Readings

While you're at it my little legislation and legal-loving friends, make sure you've read over our Travel Waiver article (free sample travel waivers and Travel Tips Checklist) and our article that breaks down the Seller of Travel Laws. We also have a great resource for Travel Agent Forms you can integrate into your website. Ignorance may be bliss, but it can cost a lot of money when your bubble is popped by a fine or a lawsuit!

An Update: 6/28/2013

I want to stress the point of this article is not intended to dissuade you from selling travel insurance, it's to educate you regarding the risks.

Right now, you may be thinking you're never going to offer travel insurance, it's too risky. You're not alone, one of the hosts at the PATH meeting was ready to stop selling travel insurance she was so frustrated! But, like me, she came around.

Insurance and legal stuff can overwhelm even the savviest business owner. It's important to remember you're not alone; a simple call to the licensing department (who works with this every day) will guide you through things.

Travel insurance is the highest commission product out there—meaning the rewards are very high. Running a business means you mitigate your risks and weigh that against the reward. If you're still nervous, give yourself a few days to breathe after this article, and then, only then, ask yourself if closing the door on that income is worth it.

You might just have a change of heart.

Update 8/21/2017

TravelSafe has a great article they wrote up going over the latest travel insurance licensing drama-rama (read it). In May 2016 it was reported that 42 states have adopted the new travel insurance standards. 

"I Make a Crappy Lawyer" Disclaimer

And, my usual a disclaimer, this article should not be taken as legal advice. I'm about as far from a lawyer as it gets. The laws are constantly changing so please double-check all information with your preferred travel insurance company.

In Closing

Okay seriously, most challenging article to date. This is some heavy stuff and if you made it this far, you're amazing. It took me a month to get this far! :) If this is your first stop to the site, welcome, I hope you stick around! I work with agents starting and growing their travel agencies. You can find me on Facebook, Twitter, and Instagram.

Photo credits: Crosa

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