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6 questions to ask before buying trip insurance
Some agents may try underhanded tactics, but you can protect yourself
George Fredrickson never suspected the travel insurance he bought for his transatlantic cruise last year was fake.
When he paid nearly $8,000 for a Christmastime sailing on the MSC Orchestra through Sarasota, Fla.-based Legendary Journeys, an agent also sold him a $432 policy from a company called Traveler Protection Services. It would reimburse him if he had to cancel his vacation, he was promised.
But after Fredrickson’s wife needed spinal fusion surgery late last year and her doctor advised her to stay home, he learned the truth: Not only was his policy an unlicensed and illegal insurance product, but within weeks of filing a claim, Traveler Protection Services and several related companies had gone out of business. His vacation appeared to be lost.
To describe Fredrickson as upset would probably be an understatement. He’s filed a formal complaint with the state of Florida. He’s also contacted an attorney and hopes to start a class-action lawsuit against the travel agency and insurance company. “I think both of them should be held liable,” says the Davenport, Fla., retiree.
There are no statistics on the number of phony insurance policies sold to travelers. But in the last month, since the apparent bankruptcy of Arvada, Colo.-based Traveler Protection Services, Prime Travel Protection and a related company called Universal Assurance Group, there’s been a dramatic uptick in the number of insurance-related complaints I’ve received. At least two states — Florida and Colorado — are investigating the companies, as well as a network of hundreds of travel agents who sold the policies.
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Legendary Journeys insists it didn’t know the insurance it sold Fredrickson was unlicensed and says when it found out, it stopped offering it. “As far as we were told by them, [they were] licensed to sell travel in Florida and all 50 states,” says Stew Carrier, a customer service specialist and group tour coordinator. “Legendary Journeys is not in the insurance business and we only act as the intermediary for the insurance provider,” he adds.
In a letter sent to policyholders in late February from a trustee claiming to represent the three bankrupt insurance companies, holders of approved claims were assured that they’d be paid to “the greatest possible extent” over the next three years.
But some people familiar with the companies are incredulous. They believe the defunct insurance carriers are trying to buy time — time that its mostly elderly customers don’t have. And enough time to do what they claim these insurance companies have been doing for several years: to move to another state, morph into a new company and start selling unlicensed insurance through the same network of travel agents whose loyalty it buys with generous signing bonuses and too-good-to-be-true commissions.
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Barry Resnick, a college professor from Orange, Calif., whose mother lost her vacation after buying an unlicensed policy a few years ago, now tracks companies that offer fake travel insurance. He says Traveler Protection Services is just the latest in a string of bogus travel insurance companies. “The perpetrator lines up a ring of travel agents, promising commissions up to four times what a legitimate insurance company would pay,” he says. “The product is masked to look like real insurance, promising compensation for specific potential future losses, in exchange for a payment.”
And then it’s marketed to retirees who are looking for an affordable insurance policy and who lack the resources to sue the fake insurance company or travel agent when a claim isn’t paid. In short, says Resnick, they’re the perfect victims who have allowed the fake insurance companies and their surrogates to get away with the perfect crime — at least until now. “A lot of the agents selling these policies are repeat offenders, waiting for the next new company to offer the same illegal product," he says.
I asked Jerry Watson, a principal for the travel insurance companies in question, about the allegations made against his companies and several other now-defunct businesses he worked with that sold travel protection policies. Watson told me his policies were a “benefit services contract” — not insurance — and that he clearly represented them as such. “I ceased operations when I realized that there was no way that we could continue to pay claims based on the incoming revenues,” he says, adding, “I have no plans to leave Colorado and I do not have any intentions of operating any type of travel protection company.” You can see the full text of our interview here.
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