Back up a moment
For those unaware of the need for the law, we should start with the background. Insurance regulation in the US is managed on a state-by-state basis, so if an insurer wants to sell products to customers in more than one state, they have to be prepared for additional bureaucracy and expense to ensure compliance in all of them.
In November 2015, the US Travel Insurance Association and Tourism and Travel Industry Consumer Coalition raised concerns regarding lack of specificity and consistent application of regulation of the travel insurance industry to the Property and Casualty (C) Committee. This prompted the committee to appoint a Travel Insurance (C) Working Group in 2016, to consider development of a model law or guideline to establish appropriate regulatory standards for the travel and tourism insurance industry. During the year, the Working Group drafted the model law using the National Conference of Insurance Legislators (NCOIL) Travel Insurance Model Act as a starting point. This defines regulatory structure related to travel insurance and covers market regulation, premium tax, rate regulation and enforcement.
The problem is that while the Act is there for the taking, not every US state has adopted it
Duke de Haas, Vice President and Deputy General Counsel, Allianz Partners USA, explained the intention in more detail: “The Travel Insurance Model Act provides both strong protections to consumers and regulatory certainty, plus a level playing field for the companies that provide travel insurance products. With travel insurance being one of the original ‘insurtech’ products, it is distributed and underwritten differently than traditional personal insurance products like auto and homeowners. Accordingly, the US Travel Insurance Association (UStiA), along with state legislators and regulators, saw a need to develop workable laws that clarify how travel insurance is regulated,” he said.
The Travel Insurance Model Act was created by NCOIL and then deliberated further by the NAIC with industry and consumer representatives, to create a strong framework for regulating travel insurance across the country.
De Haas added: “The Travel Insurance Model Act provides a number of benefits by creating uniform definitions; expanding and codifying the ability to write travel insurance as a blanket or group product; making it easier to file products in states where the Model has been enacted; clarifying the payment of premium taxes; setting out permitted and prohibited sales practices; and generally reducing regulatory confusion.”
The problem, though, is that while the Act is there for the taking, not every US state has adopted it, leaving patchy regulatory controls across the country.
Which states have adopted the Act?
There isn’t really a simple answer, as many states have adopted the Act to one degree or another. Many have not adopted the most recent version of the NAIC standards, in what the organisation describes as ‘a substantially similar manner’.
The latest information on the NAIC website offers a glimpse of the challenges insurers face when it comes to the different levels of regulation in US states. Early adopters of the latest NAIC model are Maryland, Oklahoma, Rhode Island, Texas and Virginia. At the other end of the spectrum are Puerto Rico, Northern Marianas, New York, Guam, the District of Columbia and American Samoa, which have no current activity on the Act.Iowa has already enacted a version of the Model (and adopted regulations). While some of these might not represent huge sales opportunities for insurers in terms of increasing the reach of their products easily, others certainly do – New York, for instance. All the other states have enacted some form of the Act. In total, 29 of 50 states have adopted the rule in some shape or form.
While there are always challenges in offering insurance in 50 different states, we continue to monitor and respond to specific requirements
Ongoing challenges with state regulation
De Haas said: “We are working with the US Travel Insurance Association and states around the country to adopt the Model. We have been successful in getting it adopted in 29 states so far and more are being worked on at this time. In general, the UStiA (and Allianz Partners and other UStiA-member companies) works with Departments of Insurance, legislators and any interested constituencies in getting a state-specific version of the Model enacted. While there are always challenges in offering insurance in 50 different states, we continue to monitor and respond to specific requirements in those that have not yet enacted a version of the Model. Allianz Partners feels it’s important to promote workable regulatory solutions in the marketplace, to reduce both our partners’ and our compliance risk, and is proud to be a leading voice with regulators and legislators to adopt these solutions.”
Chris Carnicelli, CEO of Generali Global Assistance, said: “We want what’s best for travellers and strongly support the US Travel Insurance Model Act. The challenge is bringing this to each state’s attention and ensuring their alignment, so we hope that the Act will be accepted by states sooner rather than later. In enacting the legislation as proposed, the Act will benefit consumers and empower regulators by codifying an efficient, fair, uniform and effective regulatory framework for travel insurance. Consumers deserve protection plans that work for them – and we’re committed to moving our industry forward, providing solutions that travellers can easily understand and rely on,” he concluded.