Do tour operators understand their own insurance? – A Club Med saga

by Janice Hough on July 30, 2010


Heaven knows, travel agents, can make mistakes and give out false information. That’s maddening, both from a client point-of-view, and from the agent’s because it is not only embarrassing, there are monetary and liability issues. But, what happens when the tour operator and their insurance agents don’t understand their own policies?

There are the times when travelers ask all the right questions, and they still don’t get the right answers. This week with Club Med was an example.

I had some new clients — a woman and her two adult daughters — interested in a vacation next March. One of Club Med’s villages seemed like a great fit and the price was right so we made a booking.

So far, so good. Then the fun started.

While Club Med has changed a great deal from their early days, one thing that remains is an annual membership fee. This is only charged upon booking, and basically amounts to a relatively small ($60 a person) surcharge. The membership fee, while it is not spelled out clearly, covers “basic” insurance.

The concern my client had about the trip was that while she and her daughters were in good health, she has an elderly father whose health might impact their vacation. When I called Club Med to ask about it, the reservation agent said they offered “Total Peace of Mind” insurance, that allowed cancellation for any reason. So I told her to go ahead and add it.

Then I started reading the fine print of the basic insurance coverage with membership. (And yes, all travel agents do not have these deals memorized, although I know the rules for the companies I book most frequently.) Since the client had mentioned something happening to her father was the only reason they would cancel, I asked specifically about that issue.

The first agent told me that there were exclusions for pre-existing conditions, so the basic insurance probably wouldn’t work. She did, however, refer me to Club Med’s insurance customer service line to be sure about the coverage. (Like many tour operators, they contract out insurance, in this case to CSA.)

The insurance agent on the phone first verified what tour operator I was using, since they cover many of them. She said that pre-exisiting conditions were not a factor for non-traveling immediate family members, and that a father counted. He did point out that the basic insurance only covered up to $1,000 a person. Which meant $3,000 total, and my clients’ vacation was a little over $4,000.

I passed this information on, but felt a little nervous about this “pre-existing” condition issue. So I called back to the Club Med insurance company’s help line later in the day. This agent told me that indeed, the pre-existing condition issue only applied to travelers, not their relatives.

This still seemed a little odd, but okay, whatever, I’ve verified the information and all is well. Then the agent adds, “Well, you know it’s only $1,000 a reservation, right?”

Ah, wrong, I didn’t.

Asked if she was sure and she says she was.

Asked if she needed to check with a supervisor, she said she didn’t, $1,000 a booking was it.

At that point, all I could figure was split the booking into two, since the clients had two rooms, and at least get them a $2,000 limit. The insurance agent agreed that sounded like a good idea.

Now I was faced with a bigger problem, because cancellations within 14 days are 100 percent penalty and losing $1,000 or so might not be a big deal, but losing over $4,000 was different.

At this point, I figure the client was going to think I am the biggest idiot in the planet but I shot her an evening email, told her about the reduced coverage. I also wrote another email to our Club Med sales representative telling her how unhappy I was both with the rule, and to find this out so late in the booking process.

In the morning, the response from our Club Med sales rep was, “What rule?

The sales representative assured me that the maximum coverage is “per membership number.” Since all guests on reservations have to have separate membership numbers, this means we were back to the $3,000 coverage.

When I checked, again, twice, with Club Med and their insurance agent, the end result was that yes, while the first Club Med agent had been wrong, the first insurance agent had been correct. The father’s health, pre-existing conditions or not, would not result in a claim being denied, and they were eligible for $1,000 coverage per person.

At this point I was especially glad the client was a referral from a good client. Because at least I had independent evidence that I was generally not crazy or that sloppy, but I passed the final information on. (And at this point have a long paper trail of names and dates as proof should there be a future problem.)

As it turns out, the client finally decided to take the insurance because it is simple and provides travel credits for cancellation for any reason, does cover any and all reasons, from work to whims.

The case, however, illustrates an ongoing problem in the travel industry. It’s hard enough that insurance policies are confusing, and that many seem designed to exclude more things than they cover.

But often the reservation agents at the tour operator and cruise line are confused about details. Any travel agent, or “do-it-yourself” traveler, can add their own story about getting the wrong information.

The best solution, or way to avoid problems, is probably to try to get a copy of the insurance and read it VERY carefully. Or when possible for agents, to work with companies where the policies are simple and consistent. (In this case, however, Club Med Villages, unlike most hotels, do not work through a choice of operators.)

In the end, the client was comfortable with the end result, and all we lost was a lot of time. On the other hand, I can’t help thinking that this sort of situation could have easily ended in disaster and while having the names and dates of the quoted information helps, at best it means winning after what is usually a long fight.

For Club Med, a company whose slogan is “Where Happiness Means the World,” that wouldn’t be a happy time for anyone.

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  • Arizona Road Warrior

    I do think that tour operators understand their own insurance since these tour operator design them with help from a third party and/or an insurance company.

    Personally, I will not purchase travel insurance from a tour operator, a cruise line, an airline, etc. because the terms for the travel insurance are generally written to their benefit not the traveler.

    The price for travel insurance from a tour operator, a cruise line, an airline, etc. is generally less than a policy that you can buy on your own. However, the benefits from an independent policy are generally greater, better, etc.

    “As it turns out, the client finally decided to take the insurance because it is simple and provides travel credits for cancellation for any reason,…” To me, this sounds like if they cancel the trip that they won’t receive money back but credit for a future trip. For me, I want my money back. What if it is another year or so before you can take the trip? What if the tour operator goes out of business in that time? I doubt it for Club Med but what if you find out that the tour was crappy; was a rip-off; wasn’t suitable for you; etc?

  • Hapgood

    When I take a trip that requires significant non-refundable expense, I buy my own insurance through insuremytrip.com. Their website allows apples-to-apples comparisons of various policies, so you can always know what you’re buying. There are other similar insurance broker websites that are probably just as good, but I have no experience with them.

    Third-party coverage is almost always better than what travel operators offer. It’s often difficult to know exactly what you’re getting with a “trip protection plan.” Sometimes it isn’t even real insurance, but merely a contractual modification that makes a non-refundable deposit or payment refundable under certain circumstances. As Arizona Road Warrior notes, the “refund” might be in the form of a credit for future travel. This might be worthless if, for example, the cancellation is for an accident that renders you permanently unable to travel, or the death of a spouse that leads to a single-occupancy penalty that makes the trip unaffordable even with the credit. And if the tour or cruise operator goes bankrupt, you lose not only the cost of the trip but the cost of the “protection plan.”

    I have elderly parents as well as my own chronic conditions that are well-controlled but inherently unpredictable, so the specific pre-existing condition terms are essential considerations. Many insurers waive their exclusions for pre-existing conditions if you buy a policy within a short period of booking (usually from one to two weeks). So it’s a good idea to do the comparison shopping first, and then buy an appropriate policy immediately after booking to be sure.

  • John Baker

    As a tour operator, I agree with both of you. I only purchase Travel Insurance from independent companies (one exception is that I have purchased the “included” policy when its underwritten by a third party). In fact, my company doesn’t even play the “self-insured” game. We recommend and sell a policy from a third party insurance company we believe in.

    If I have a dispute, I want to have a regulated product that I have legal rights (see your state’s insurance commisioner). “Self-insured” policies, while cheaper, do not provide that.

  • http://www.singleparenttravel.net John Frenaye

    Frustrating. I am confused though–was she traveling within 14 days or next March?

  • MeanMeosh

    Like others have commented, I only purchase third party coverage. There are certain coverages that are super critical for me, but others I could care less about because either my health insurance or credit card insurance covers it already. I can mix and match what I need by shopping for third party coverage, whereas the “trip protection” that’s often peddled by tour operators and online travel agencies has fixed coverage, and as Arizona mentioned, is usually set up to favor the agency over the traveler. I’ll second Hapgood’s recommendation of insuremytrip.com. I’m sure others are out there, but it’s a decent metasearch site. Its best feature is that the search engine can be filtered by select policy inclusions, so if there’s a coverage that you absolutely must have, it limits the search to policies that contain that specific feature.

    Also, here’s one other reason to NEVER by insurance through the tour operator itself – if the operator goes out of business, you’re very likely SOL. Most third party policies, on the other hand, provide an option to cover bankruptcy of the operator.

  • Joel Wechsler

    @John Baker third party coverage from a tour operator, in many, if not most, cases will not cover default, failure or bankruptcy of the operator..
    @MeanMeosh you should also be sure that there is coverage in case of default, as failed operators may simply go out of business and never formally file for bankruptcy.

  • http://www.indian-tours-operators.com Best Tour Operators

    When I take a trip that requires significant non-refundable expense, I buy my own insurance through insuremytrip.com. Their website allows apples-to-apples comparisons of various policies, so you can always know what you’re buying. There are other similar insurance broker websites that are probably just as good, but I have no experience with them.

  • Hapgood

    Please note that I have nothing to do with “Best Tour Operators,” who copied part of my earlier post to fill up their comment spam.

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