After Wall Street meltdown, is it time to rethink travel insurance?

by Janice Hough on September 16, 2008

If you have to cancel an expensive trip at the last minute, you’ll be glad you have travel insurance. But what if the insurance is no good?

After Wall Street’s recent meltdown, that’s a question worth asking. Among the developments, AIG (American International Group), the parent company of Travel Guard, a large travel insurance company, had to request permission from the state of New York to lend itself $20 billion to avoid a “potentially disastrous credit downgrading.”

AIG stock fell over 60 percent on the news.

AIG sent a letter to travel agents today hoping to “ease your concerns and those of your clients.” Here’s what it had to say:

We know that the media reports have been sensational and upsetting. We also know that the media thrives on gloom and doom.

Also, according to an article in today’s Wall Street Journal, Standard & Poor’s said that AIG had enough money to pay claims and post collateral, if needed.

AIG Travel Guard is a well-known and trusted name in the travel industry, and is actually used as the in-house insurance company by many tour operators. And it is recommended by many others. AIG itself is one of the largest insurance and financial services companies in the world. On the other hand, Bear Stearns and Lehman were pretty big, too.

Princess Cruises, for example, uses a different insurance supplier, though several different reservationists advised me today that passengers would be covered if they bought insurance through the cruise line, even if the insurance company itself was no longer in business.

In this current uncertain economy, there are no guarantees. But at this point, it seems like careful travelers need to ask themselves one more question: Who is more likely to be out of business by the time you travel — your supplier or your insurance company?

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Tagged as: AIG, bankruptucy, travel insurance

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  • Joe Farrell

    I dunno – 99% of travel insurance is not really insurance – it is a ponzi scheme whereby the people paying ‘premiums’ now are paying last week’s losses.

    Travel insurance only makes sense if it is actual insurance, regulated by a state with a guarantee fund in the event the ‘insurer is nothing more than a collection agent.

    In a bad economy you get more claims from people who haev to cancel trips cause they need the money more than the trip. That means higher claims which means more fraud and less payment of those claims.

  • http://leftcoastsportsbabe.com Janice Hough

    Good point. And my personal feeling about insurance companies, including travel insurance, is that they look for reasons not to pay…

  • Robert Huff

    I think there are good travel insurance policies available, consumers just need to be more savvy than average to read through the little print (how many readers have read their entire home insurance policy?)

    Our travel club members aren’t going to buy AIG Travel Guard any more. This last weekend they removed “AIG” from all of their websites, in some pretense that they are no longer a wholly-owned subsidiary? While that may be a way to contain the losses associated with being an AIG company, it’s nothing short of consumer fraud to not disclose that fact. I don’t trust them and will be looking for an alternative. Suggestions welcome.

  • Janice Hough

    Agreed on the fine print, I just wrote another post mentioning just how scary it can be…. I hate to recommend insurance because I think most companies seem to prefer to deny claims whenever possible. I have used Access America, as far as I know, is not dealing with any financial issues. Have heard some good things about Travelex, based I think in London, but am not that familiar with them.

    Also, many tour operators offer their own insurance, either self insurance or through a third party, and they may guarantee that insurance. Which of course gets back to the “who do you trust?” issue. Good luck.

  • http://www.travelguard.com Peg Zwicker

    At Travel Guard, we’re not your typical travel insurance company. We go out of our way to provide astonishing customer service, including post-trip claims processing.

    Here’s our approach to claims handling. I think you’ll agree our service standards exceed anyone else in the industry:

    • 98% of all claims are filed with one phone call. We don’t mail burdensome, blank claims forms.
    • All claims are paid within 24 hours of final documentation.
    • Our “Fairness Principle” is applied to all denied claims. As part of this principle, all denied claims are sent to an artibrator for review. If the arbitrator determines that the claim was not justified, a phone call is made to the claimant to explain the reason for denial. Travel Guard does not send impersonal claims denial letters.

    We’re extremely proud of the claims service we provide and we routinely receive compliment letters on our service. Here’s an e-mail we just rec’d this week (Sept. 22, 2008):

    “Please forward this to John M. Noel, President

    I want to take this opportunity to praise your company for outstanding customer service. My friend and I had planned a vacation to France for October, however in July she broke her foot in three places and is still unable to travel. Our first step was to cancel our trip. The second step was to call AIG to determine what we needed to do in order to file a claim for our non-refundable deposits. I spoke to a lovely woman named Erica (sp?) who not only explained the process but also started it and assigned us both claim numbers. She was so pleasant and helpful.

    Once we got all of our required documentation we mailed our claim on September 8th knowing that it would take at least a month to process. We were okay with that. What a wonderful surprise when we received our checks in the mail on September 20th (a mere 12 days from the mailing date), accompanied by the very nice personal letter from John Noel. In today’s world, good customer service, if any, is a rarity. Your employees need to be commended for not good customer service but outstanding customer service! We recommend AIG to everyone we know who is making travel plans.

    May the current financial woes be few and you careers be long and fruitful!

    Sincerely,

    Jane …”

    If anyone is concerned about Travel Guard’s ability to pay claims, they needn’t be. Travel Guard has been working with National Union Fire Insurance Company of Pittsburgh since 2002 (before our acquisition by AIG). NUFIC is a very strong insurance company with surplus of $12.1 billion. The surplus of our next closest competitor is only $1.1 billion. Surplus is cash that an insurance company sets aside that is over and above the amount used to pay claims. It is extra security for policyholders. Travel Guard has four times the surplus of ALL the other major travel insurance providers combined!

    AND – this surplus cannot be touched. “The bottom line is there can be no raid on the reserve funds that are in those insurance companies without the approval of a state regulator and I can promise you no state regulator is going to allow those reserves to be drawn down and put their insureds in jeopardy,” This is what Sandy Praeger, the president of the National Association of Insurance Commissioners, said in a conference call with the media on 9/17/08. http://www.marketwatch.com/news/story/aig-policyholder-should-you-stay/story.aspx?guid=%7B500B803E%2D11D1%2D4584%2D8D66%2D85E26BC9EA66%7D

    We look forward to continuing to provide astonishing customer service to the millions of travelers who insure their trips through Travel Guard for many, many years to come.

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