Relates to travel insurance; including loss of baggage or personal effects, interruption or cancellation of trip, damages to accommodations or rental vehicle, etc.

Purpose

This bill would reform the travel agent licensing requirements in New York to be in accord with the National Association of Insurance Commissioners (NAIC) and National Conference of Insurance Legislators (NCOII,) models Insurance licensing requirements will be shifted from the retail travel company and its employees - the vast majority of whose business emanates from scheduling trips and is not insurance related - to the travel insurance agent. The travel insurance agent will be a managing general agent, third party administrator, or other intermediary working with the insurer and travel company. Retail travel companies would be registered under the travel insurance agent's license. The bill also strengthens consumer protections by adding training requirements for each employee and authorized representative of the travel company, by clearly identifying the limited activities in which the travel company is permitted to engage, and by requiring additional consumer-oriented disclosures on travel insurance materials.

Summary of provisions

Section one of the bill amends the definition of "limited licensee" in insurance law section 2101 to include a person authorized to sell travel related products and services

Section two of the bill amends insurance law section 2131 to define the terms "travel insurance," "travel company", and "travel insurance agent", along with other travel insurance-related terms The activities in which travel companies may engage are also clearly defined and limited. Licensing requirements are shifted from individual retail travel companies and their employees to travel insurance agents. The Superintendent of Financial Services is vested with authority to regulate these agents, including the power to impose monetary fines and revoke their licenses. New consumer protections include a requirement to provide a description of the contract terms, the claims process, and an explanation of the review or cancellation procedure

This section adds a registration requirement compelling travel insurance agents to maintain a register of each retail travel company offering travel insurance on its behalf for periodic review by the Superintendent. This section also inserts a training requirement for each employee and authorized representative of the travel company. Topics required to be covered include the types of insurance offered, ethical sales practices, and required disclosures to prospective customers.

Section three of the bill amends insurance law section 3452 to specifically authorize the issuance of a group property travel insurance policy to a travel company where the policy insures its travel customers

Section four of the bill provides that the act shall become effective one hundred and twenty days after becoming a law

Justification

Multi-state licensing of insurance producers has been a challenging issue for regulators and industry alike for decades. In response, the NAIC developed the Producer Licensing Model Act (PLMA) to reflect the licensing reciprocity requirements of the federal Gramm-Leach-Bliley Act. A majority of states including New York have adopted all or a portion of the PLMA, putting in place a more efficient reciprocal licensing framework that enabled producers to more easily obtain non-resident licenses.

However, these actions have not effectively addressed the practical challenges associated with multi-state licensing for limited lines travel insurance. Before states began implementing these reforms, there were forty-one dissimilar and outdated definitions of travel insurance across the states, with some still referencing steamships and other antiquated terms. In an industry that can suffer from high turnover rates, these roadblocks made licensing reciprocity nearly impossible.

In New York, travel companies have encountered unique licensing challenges, causing confusion, delay, and leading to compliance problems. Naming conflicts between affiliated or similarly-named companies require some travel companies to change their names or use fictitious names. In other words, travel agencies, whose principal business is selling trips and for whom travel insurance is a minute portion of their business, are forced to change their names or use fictitious names in order to satisfy a regulatory requirement that is aimed at more traditional insurance producers. In addition to these producer licensing issues, travel insurance (which offers a fairly standard, low-cost benefit package) is addressed within rules not specifically designed for travel insurance or its current use of group coverage, creating additional compliance difficulties.

This legislation provides a workable solution to resolve the regulatory inconsistencies and compliance issues for travel insurance agents and travel companies. It establishes a licensing framework that reflects the unique distribution of travel insurance within the travel industry. Regulatory oversight is strengthened, with burdens appropriately placed on the travel insurance agent, rather than on the retail travel company (whose activities are strictly limited to providing general information, and who is not seeking to act as an insurance agent). This legislation also dramatically improves consumer protection by clarifying accountability and requiring notice to the consumer and the Department of Financial Services with regard to who is responsible for the sale of travel insurance

In the last three years, 34 states, including California, Texas and Florida, have implemented very similar legislation, legislation has been passed and is awaiting governors' signatures in three additional states, and it is anticipated that most of the remaining states will implement these standards in the near future The NAIC/NCOIL standards provide regulators and the travel insurance industry a clearer and more workable licensing framework for travel insurance, while at the same time improving consumer protections and disclosures.

Legislative history

New bill.

Fiscal implications

None.

Effective date

This act shall take effect on the one hundred and twentieth day after it shall have become a law.