Consumer group issues holiday travel advisory: Think twice before purchasing travel insurance this season
November 22, 2013
Washington, DC – The nation’s pioneering consumer advocacy organization has issued a warning to consumers planning air travel this holiday season to avoid wasting money on travel “protection” insurance policies, which are often worthless to consumers. The Washington, DC-based National Consumers League (NCL) found, in a report published this fall, that while online travel Web sites offer insurance as “peace of mind” for the consumer, some of the most popular policies give little actual protection if something unexpected necessitates and change in travel plans.
As the nation enters the beginning of the holiday travel season, and with one of the busiest travel weeks of the year just ahead, NCL is warning air travelers to think twice before making travel insurance purchases and read the policies over carefully before buying. According to the industry trade group Airlines for America, an estimated 25 million passengers will fly over the 12-day Thanksgiving travel period.
“With the rising cost of airfare, and the inability for most consumers to afford truly flexible, refundable tickets, consumers reasonably fear that the need for a last-minute change to air itineraries could break the bank. Enter air travel insurance, which consumers are buying to hedge against the risk of paying hefty change or cancellation fees,” said Sally Greenberg, NCL Executive Director. “The unfortunate reality is that these ‘protection’ policies bring in big bucks for the airlines each year but offer very little real value for consumers.”
Airline travel insurance is typically marketed as a small add-on after consumers buy tickets. The fee is typically based on the price of the ticket. These small fees are big business for the airlines industry. Travel insurance sales ballooned to a nearly $2 billion industry in 2012. It is unclear how much travel insurance policies actually pay out in benefits. Based on the high commissions travel insurance agents advertise receiving, advocates suspect that it is significantly higher than commissions earned for more traditional auto, home, or life insurance.
The NCL study focused on trip-cancellation insurance, which is aggressively marketed during the airline ticket-buying process. For example, the checkbox to buy travel insurance is sometimes pre-checked, meaning consumers must actively decline insurance they may not want in the first place.
NCL has issued a number of recommendations for reform, including a requirement that insurance sellers be transparent about the percent of claims they actually pay out. This would enable consumers to better judge the value of travel insurance. For example, relatively low premiums for travel insurance may not be a good deal if there is a track record of paying out few claims.
NCL’s close inspection of the fine print in these travel insurance policies revealed a long list of exclusions, including some of the most common scenarios an air travel consumer could reasonably anticipate. For example, common exclusions include losses stemming from:
- Illness involving an existing medical condition
- Pregnancy or childbirth
- Termination of employment
- A business meeting being cancelled
- A student’s test date being changed
“While airline travel insurance may seem like a modest price to pay to protect yourself from bigger costs later, the reality is that this insurance may not pay out,” said John Breyault, NCL Vice President of Public Policy, Telecommunications and Fraud and author of NCL’s report. “Travel insurance gives consumers a false sense of comfort that they will be covered in the event they need to change their flight. In reality, these policies are riddled with exclusions and exceptions and are likely a bad deal for consumers.”
To read NCL’s full report, click here.
About the National Consumers League
The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.