Opt-in cover costs Travelocity
The Minnesota Department of Commerce in the US announced in February that 81,970 residents who bought travel insurance through the Travelocity website between 1 June 2009 and 24 January 2012 would receive nearly US$2.5 million in refunds. Sarah Watson reports
The Minnesota Department of Commerce in the US announced in February that 81,970 residents who bought travel insurance through the Travelocity website between 1 June 2009 and 24 January 2012 would receive nearly US$2.5 million in refunds. Sarah Watson reports
Mike Rothman, commerce commissioner, alleged in a consent order that the New York-based National Union Fire Insurance Company (NUFIC) of Pittsburgh and Wisconsin-based Travel Guard Group Inc. were both in violation of the State of Minnesota’s law governing sales of insurance, as travel cover was automatically added to the travel bookings of consumers when in fact the insurance was optional. Included in the consent order is the requirement that NUFIC pays the state of Minnesota $250,000 as a civil penalty for the alleged market misconduct.
Commissioner Rothman said of the case: “Tens of thousands of Minnesota travellers were allegedly enrolled automatically in travel insurance policies when they purchased their airline tickets online. These allegations show a clear violation of state law and represent a breach of consumer trust. We ordered the companies involved to stop these deceptive practices and properly reimburse all affected customers.”
The Travelocity website automatically added the price of a travel insurance policy, which ranged from $25 to $45, onto the final bill for customers, only giving them an ‘opt-out’ option. The State says that by not receiving affirmative consent from consumers in either an oral or written format, the NUFIC and Travel Guard both used ‘an unfair method of competition and deceptive practices in the business of insurance in violation of MS72A.20, subd. 18 (b) (2010) and Minn. R. 2700.3200, subp. 2 (2011)’.
Based on its findings, Commissioner Rothman issued an immediate ‘cease and desist’ order, which states that both companies stop the automatic enrollment of consumers in travel insurance plans on the Travelocity website or any website powered, directly or indirectly, by Travelocity. In addition, the NUFIC was given 30 days to implement a process acceptable to the Department whereby such premiums shall be refunded to Minnesota customers. That process includes stipulations for the NUFIC to deposit $2,481,385 into a fund within 30 days; for all individuals whose travel originated in Minnesota and made a claim, refund the premium paid by these customers within 45 days of the consent order; for all individuals whose travel originated in Minnesota other than those individuals identified by the Department, NUFIC shall post notices regarding the Fund in a manner approved by the Department, such that all individuals may seek a refund of the premiums they paid for the insurance policy; NUFIC shall refund the premium paid by such individuals within 30 business days of receipt of a valid claim for a refund, with said amount being deducted from the fund; and finally that the fund be available for eligible consumers until 1 August this year, and that by no later than 17 September this year, the balance of the fund shall be paid to the State of Minnesota General Fund. Finally, the NUFIC is to pay a civil penalty to the State of Minnesota to the tune of $250,000.
Carol Mueller, spokeswoman for Travel Guard (a Chartis company), said the company was ‘pleased to have resolved this matter with the State of Minnesota’. Mark Herr, spokesman for NUFIC (owned by AIG), made the same statement, adding: “We look forward to continuing to service our valued clients.” Travel Guard insurance is underwritten by NUFIC.