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By:  Patricia McHugh Lambert, Esquire

Introduction

On December 19, 2018, the National Association of Insurance Commissioners (“NAIC”) adopted a Travel Insurance Model Law (“Travel Ins. Model Law”) after three years of development in the Travel Insurance Working Group.  Largely based off the National Council of Insurance Legislators’ (“NCOIL”) March 2017 version, the NAIC Travel Insurance Model Law intends to create a foundation for states to enact regulations to help travel insurance align with to the needs of consumers.

The Model Law classifies travel insurance as an inland marine line of insurance for the purposes of form and rate filings.  Travel Ins. Model Law § 9(A).  If the travel insurance policy covers sickness, accident, disability or death occurring during travel, either exclusively or in conjunction with related coverages of emergency evacuation or repatriation of remains, however, the policy may be filed as either an accident and health product or as an inland marine product.  Id.  Additionally, the NAIC Travel Insurance Model Law sets forth standards for a Limited Lines Travel Insurance Producer License with which insurance producers can sell, solicit, and negotiate travel insurance.  Id. § 4.

The NAIC’s approval of the Model Law has already impacted the regulation of travel insurance in Maryland as the legislature in 2018 made changes to the insurance article bringing Maryland largely into line with the NAIC’s Model Law.  Md. 90 Day Report, 2018 Sess., Part H, Travel Insurance (“In an effort to modernize the regulation of travel insurance as recommended by the National Association of Insurance Commissioners, Senate Bill 652/ House Bill 979 (both passed) establish an updated regulatory framework for the sale of travel insurance in the State.”); see also Md. Code, Ins. §§ 10-101(j), 10-122, 19-1001—1005; Part VII, infra.  Several other states have similarly updated their insurance laws to conform with NAIC’s Model Travel Insurance Law.  See Part VIII, infra.

Model Law Background

Limited Line Insurance

There are 5 types of “core” limited lines insurance producer licenses, including: car rental, credit, crop insurance, surety, and travel.[1]  In addition to the “core” limited lines, some states authorize limited lines licenses for such things as pet, self-storage, communications equipment, pre-paid legal, and motor club, among others.   Within the core limited lines licenses, the regulatory requirements for issuance of a limited line license also vary widely among the states.  Id.

Passage of GLBA and Early Model Legislation

With the passage of the federal Gramm-Leach-Bliley Act (“GLBA”) in 1999, the NAIC has been working to avoid certain preemption of state producer licensing laws by compliance with the provisions of Section 321.[2]  To avoid federal preemption, the NAIC elected the reciprocity route rather than the uniformity route and crafted a model law to assist with meeting the reciprocity requirement.  Id.  The Producer Licensing Model Act (Model # 218 or PLMA) was adopted by the NAIC in 2000 and was intended to serve as the primary vehicle for states to achieve reciprocity, as well as assist in the next step to reach uniformity.  See footnote 1.

Although the PLMA established uniform definitions for the six major lines of insurance: (1) Life, (2) Accident and Health, (3) Property, (4) Casualty, (5) Variable Life and Variable Annuity, and (6) Personal Lines, the PLMA only specifically addressed one limited line—credit insurance.  Id.  The PLMA did provide certain definitions relating to limited lines, including the definition for:

“Limited lines insurance” means those lines of insurance defined in [insert reference to state specific limited line statute] or any other line of insurance that the insurance commissioner deems necessary to recognize for the purposes of complying with Section 8E; and

“Limited lines producer” means a person authorized by the insurance commissioner to sell, solicit or negotiate limited lines insurance.

Id.  The original Model Law was limited to licensing, as well as commentary on the current regulatory environment and the critical need for regulatory/legislative modernization and guidance.  Id.

Subsequent to the adoption of the PLMA, in 2002, the NAIC adopted the Uniform Resident Licensing Standards which focused on the certain broad areas not addressed in the PLMA: (1) licensing qualifications, (2) pre-licensing education, (3) licensing testing, (4) integrity/background check standards, (5) license application process, (6) appointment process, (7) continuing education requirements, and (8) limited lines.  Id.

iii.        2009 Amendments

The NAIC’s Producer Licensing (D) Working Group (PLWG) was charged with ongoing monitoring of state implementation of the Uniform Resident Licensing Standards (“URLS”).  Id.  In June 2002, the Uniform Producer Licensing Initiatives Working Group, acting under the direction of the NARAB Working Group, adopted limited lines definitions which are commonly referred to as “core” limited lines car rental, credit, crop insurance, surety and travel.  Id.

In 2009, the PLWG was charged with:

“Review limited line licensing issues with particular focus on the following: (1) the establishment of a limited line that encompasses several insurance products where the business of insurance is ancillary to the business of the person offering the product, (2) the licensing requirements of individuals selling limited line insurance products, and (3) the fingerprinting of individuals selling limited line insurance products.”

Id.

Throughout 2009, thoughtful information was presented to the PLWG in an effort to outline necessary changes to the PLMA, as well as provisions of the URLS, which were necessary to address the limited lines issues.  Id.  Issues were noted as to reflect how the URLS and the PLMA were unintentionally undermining the goal of reciprocity and increasing the compliance burdens without improving consumer protection.  Id.

Industry, particularly the travel industry, proposed modifications to the PLMA and revisions to the URLS to substantively change the system.  Id. The deliberations confirmed that consumer complaints attributable to limited lines products are nominal.  Id.

As part of the PLWG effort in 2009, an ancillary definition of insurance was developed and then tabled due to resistance of some PLWG members to establish change in the current process.  Id.  Issues were presented which included whether to include “core” limited lines in the definition of “ancillary” limited lines.  Id. Some regulators expressed concern with a new ancillary line definition because of the belief that implementation would require legislative action.  Id. Some regulators also objected to any changes that would not require those who sold these products to be specifically licensed. As a result, the “ancillary” definition was tabled.  Id.

Following the tabling of the “ancillary” definition, the PLWG proceeded to review changes to the core limited lines.  Id.  The 2010 review by the PLWG included a revision of the Uniform Licensing Standards. Revisions were made to standards 16 (Lines of Authority), 33 (Definition of Core Limited Lines), 34 (Travel), and 37 (Standards for Non-Core Limited Lines).  Id.  Importantly, standard 34 adopted the Limited Lines Travel Insurance Standard.  Id.  This standard introduced a definition of travel insurance that was not limited to a specific trip or travel in connection with a common carrier.  Id.  It also introduced the concept of the “travel retailer,” a business entity that offers and disseminates travel insurance on behalf and under the direction of the “limited lines travel insurance producer.”  Id.  These revisions were retained for the recent 2018 approved version of the Travel Ins. Model Law.  See Travel Ins. Model § 4.

Under these revisions, a travel retailer may offer and disseminate travel insurance under the license held by the limited lines travel insurance producer if certain conditions are met.  See id.  The producer must hold a business entity license, pay all applicable fees, and must be clearly identified as the licensed producer on marketing materials and fulfillment packages distributed by travel retailers.  Id.  The producer must also keep a register of all travel retailers offering travel insurance on its behalf containing various information and compliance certifications.  Id.  At least one employee of the licensed producer must be a licensed individual producer and be designated as a Designated Responsible Producer (“DRP”) responsible for the business entity’s compliance with state insurance laws, rules, and regulations.  Id.  The DRP, president, secretary, treasurer, and any other person who directs and controls the licensed producer’s insurance operations must comply with the fingerprinting requirements applicable to insurance producers in the resident state of the business entity.  Id.  Each employee of the travel retailer must receive training before offering and disseminating travel insurance.  If these requirements are met, individual employees are not required to obtain a license.  Id.

2018 Approved NAIC Model Law

The recently-approved Model Law’s purpose is to move toward the creation of a comprehensive legal framework to permit and regulate the sale of travel protection products in adopting states, while protecting consumers by encouraging fair and effective competition in the market.  The Model Law expands on the NCOIL draft, which was intended to address licensing and establish a clear regulatory framework for the development and distribution of travel protection products, but ultimately did not adopt many of the provisions regarding competitive markets.  Compare Travel Ins. Model Law with NCOIL Travel Ins. Model Act (2012).

The NAIC hopes their approved Model Law will encourages innovation in the marketing and development of travel protection products, providing value to consumers and helping support the tourism industry—a major economic driver—despite many of the proposed provisions regarding a regulatory framework for competitive travel insurance markets not ultimately being adopted.  (The November 18, 2012 NCOIL version of the Model Law had a section for Competitive Markets in travel insurance.  Id. § 6.)

Maryland Response

Maryland provides limited lines insurance producer licenses for various types of limited lines insurance,[3] including (i) sellers of transportation tickets (travel insurance);[4] (ii) limited line credit insurance;[5] (iii) employees of health maintenance organizations;[6] (iv) attorneys who solicit, procure, or negotiate title insurance contracts,[7] (v) portable electronics vendors,[8] and (vi) motor vehicle rental businesses selling insurance incidental to rental.[9]

In 2018, Maryland passed legislation to brings its travel insurance law into close conformance with the NAIC’s Model Law.  Md. 90 Day Report, 2018 Sess., Part H, Travel Insurance (“In an effort to modernize the regulation of travel insurance as recommended by the National Association of Insurance Commissioners, Senate Bill 652/ House Bill 979 (both passed) establish an updated regulatory framework for the sale of travel insurance in the State.”).  These changes dealing with travel insurance in Maryland can be found in Subtitle 10 of the Insurance article of the Maryland Code and came into effect on October 1, 2018.  Md. Code, Ins. §§ 19-1001—1005.[10] As a result of these changes, Maryland regulates limited line travel insurance in virtually the same fashion as NAIC’s Model Travel Insurance Law.

What is “Travel Insurance”

The Model Law defines “Travel Insurance” as coverage for personal risks incident to planned travel, including:

  1. Interruption or cancellation of trip or event;
  2. Loss of baggage or personal effects;
  3. Damages to accommodations or rental vehicles;
  4. Sickness, accident, disability or death occurring during limited duration travel;
  5. Emergency evacuation;
  6. Repatriation of remains; or

Travel Insurance does not include major medical plans that provide comprehensive medical protection for travelers with trips lasting longer than six (6) months, including for example, those working or residing overseas as an expatriate, or any other product that requires a specific insurance producer license.”  Travel Ins. Model Law § 3 (Definitions).

Maryland defines “travel insurance” in the same manner as the model law.[11] Like the Model Law, the Maryland Insurance Commissioner may issue a limited lines license to a business or entity that sells travel insurance upon application with special forms the Commissioner considers proper in connection with the application for or renewal of a limited lines license.  Md. Code, Ins. § 10-122(a).  Like the NAIC’s Model Law, Maryland’s travel insurance law does not apply to cancellation fee waivers or travel assistance services.  Md. Code, Ins. § 19-1002(b)(2).

Licensing

The NAIC Travel Insurance Model Law sets forth standards for a Limited Lines Travel Insurance Producer License with which insurance producers can sell, solicit, and negotiate travel insurance.  Travel Ins. Model Law § 2.

The Commissioner may issue a Limited Lines Travel Insurance Producer License to an individual or business entity that has filed with the Commissioner an application for a Limited Lines Travel Insurance Producer License in a form and manner prescribed by the Commissioner.  Travel Ins. Model Law § 4(A).  Such Limited Lines Travel Insurance Producer shall be licensed to sell, solicit or negotiate Travel Insurance through a licensed insurer.  Id.  No person may act as a Limited Lines Travel Insurance Producer unless properly licensed.  Id.

The Model Law provides that Travel Retailers may offer and disseminate Travel Insurance under a Limited Lines Travel Insurance Producer business entity license under certain conditions.  Travel Ins. Model Law § 4(B).  The most onerous conditions for a Limited Lines Travel Insurance Producer to offer Travel Insurance through a Travel Retailer relate to (i) a register which must be maintained by the Limited Lines Travel Producer containing information regarding each Travel Retailer that offers Travel Insurance on the Limited Lines Travel Insurance Producer’s behalf, and (ii) a program of instruction or training which must be given to each employee and authorized representative of the Limited Lines Travel Insurance Producer.  Id.

Under the Model Law, Limited Lines Travel Insurance Providers must require each employee and authorized representative of the Travel Retailer whose duties include offering and disseminating travel insurance to receive a program of instruction or training, which is subject at the discretion of the Commissioner to review and prior approval.  Id.  The training material shall, at a minimum, contain adequate instructions on the types of insurance offered, ethical sales practices, and required disclosures to prospective customers.  Id.

This training must also include direction that the retailer, employees, administrator is prohibited from making any statement or engaging in any conduct express or implied that would lead a customer to believe travel insurance is required, or that anyone other than a licensed travel insurance producer is qualified to evaluate the adequacy of any of the customer’s existing insurance coverage.  Id.

Similarly, Maryland permits travel retailers to offer and disseminate travel insurance on behalf of and under the license of a limited lines travel insurance producer under exactly the same circumstances as the Model Law.[12]  The general conditions for a limited lines travel insurance producer to offer travel insurance through a travel retailer under the Model Law are the same for the requirements in Maryland relating to (i) maintenance of a register containing information regarding each travel retailer, and (ii) a program of instruction or training which must be given to each employee and authorized representative of the limited lines travel insurance producer.[13]

Like the Model Law, Maryland requires that this training contain “at a minimum, instruction on the types of insurance offered, ethical sales practices, and required disclosures to prospective customers.”[14]  A Limited Lines Travel Insurance Producer, in both Maryland and under the Model Law, is responsible for the acts of the Travel Retailer and is tasked with using reasonable means to ensure compliance by the Travel Retailer with the law.[15]

One difference is that under the Model Law, the training must include “direction that the retailer, employees, administrator is prohibited from making any statement or engaging in any conduct express or implied that would lead a customer to believe travel insurance is required, or that anyone other than a licensed travel insurance producer is qualified to evaluate the adequacy of any of the customer’s existing insurance coverage.”  Travel Ins. Model Law § 4(B).  In Maryland, however, this information need only be given in the brochures or written materials provided by travel retailers offering or disseminating travel insurance on behalf of a limited lines travel insurance producer.[16]

Travel Protection Plans

In Section 6, the Model Law provides that Travel Protection Plans may be offered for one price for combined features that the Travel Protection Plan offers in each state if:

  1. The Travel Protection Plan clearly discloses to the consumer at or prior to the time of purchase that it includes Travel Insurance, Travel Assistance Services and Cancellation Fee Waivers as applicable, and provides information and an opportunity at or prior to the time of purchase for the consumer to obtain additional information regarding the features and pricing of each; and
  2. The fulfillment materials: (1) Describe and delineate the Travel Insurance, Travel Assistance Services and Cancellation Fee Waivers in the Travel Protection Plan, and (2) include the Travel Insurance disclosures and the contact information for persons providing Travel Assistance Services and Cancellation Fee Waiver, as applicable.

Travel Ins. Model Law, § 6.

The Maryland travel insurance law mimics these provisions of NAIC’s Model Travel Insurance Law regarding travel protection plans.  Md. Code, Ins. § 19-1003 (Conditions to offer travel protection plans).

Sales Practices

In Section 7, the Model Law makes all licensed persons and those who are not licensed but should be licensed who offer Travel Insurance to residents of the state as subject to the Unfair Trade Practices Act.  Maryland also adopted this provision of the Model Act.  Md. Code, Ins. § 19-1004(a).

The Model Law also establishes offering or selling a Travel Insurance Policy that could never result in payment of claims for any insured under the policy (illusory travel insurance) as an unfair trade practice. Id. § 7(B).  Maryland has similarly adopted this provision.  Md. Code, Ins. § 19-1004(b).  The Model Law further prohibits licensed persons from offering insurance via a negative option or opt out, which would require a consumer to take an affirmative action to deselect coverage such as unchecking a box on an electronic form while purchasing a trip.  Id. § 7(E).  Maryland has likewise adopted this provision.  Md. Code, Ins. § 19-1004(d).

Section 7 also contains provisions regarding marketing Travel Insurance including information about exclusions and other policy information which must be provided to prospective purchasers of Travel Insurance.  Id. § 7(C).  Maryland has similarly adopted documentary requirements to be provided to a consumer before the purchase of travel insurance (including sales materials, advertising materials, and marketing materials, which must be consistent with the travel insurance policy itself).  Md. Code, Ins. § 19-1004(c)(1)-(5).  Section 7 also requires that each insurance file with the Commissioner, before using, all Travel Insurance rates and forms it proposes.  Id. § 7(C)(1).

Finally, in rate filings, rates for Travel Insurance shall be based on characteristics of the insured trip or trips and of the individual person who elects and purchases Travel Insurance.  Travel Insurance Model Law § 8(C).  Insurers are not permitted to use different rates for different marketing or distribution channels.  Id.  Maryland has not adopted these provisions.

Recent Responses From Other States

Recently, Ohio (SB 169) also enacted travel insurance legislation adopted variations of the Limited Lines Travel Insurance Model Act.  Similarly, Pennsylvania (SB 630) has enacted legislated adopting a variation of the Limited Lines Travel Insurance Model Act.  Legislation has likewise been introduced in Rhode Island,[17] dubbed the “Travel Insurance Act,” which would adopt the NAIC’s model act with modification.

The Model Act notes that “[s]tates that have already implemented a licensing and registration law or regulation consistent with the NCOIL Limited Lines Travel Insurance Model Act and NAIC Uniform Licensing Standard 34 (Limited Lines Travel Insurance Standard) may choose to cross-reference that law or regulation instead of using the language set forth in this section.”  Model Act § 4 Drafting Note (2018).

Prior to the recent approval of the Model Law, as of 2014, according to the American Society of Travel Advisors, thirty-one (31) states had taken initiative to include travel insurance as a limited line insurance to come into line with the limited line travel licensing guidelines previously adopted by NAIC.[18]  For example, in 2012 Alabama added travel insurance as a limited line of insurance.[19]  Arkansas as early as 2009 passed Ak. H.B. 175 (AS 21.27.150(a)).

In 2013, Washington’s insurance commissioner amended WAC § 284-17-001 to bring the “agency in line with the uniform limited line travel licensing guidelines adopted by the National Association of Insurance Commissioners.”  California, which had previously passed the NAIC standard in 2012, subsequently eliminated the option of maintaining a limited lines travel insurance license.

  1. Sources:
  1. Travel Insurance Model Law — text
  2. NAIC – Travel Insurance background
  3. NAIC Review of Limited Producer License Update, 24 Federation of Regulatory Counsel 3 (2013)
  4. State Updates – American Society of Travel Advisors

Md. Ins. Admin. Report on Limited Lines Insurance – 1/15/14

 

Ms. Lambert has over 25 years of experience in handling complex commercial litigation and insurance matters. Ms. Lambert has worked on national class actions, significant litigation and regulatory matters for Fortune 500 companies. She has also assisted small and mid-sized companies and business executives with contract, real estate and commercial disputes that needed to be resolved quickly and efficiently. Ms. Lambert is best known as an attorney who knows the field of insurance. She has represented insurers, policyholders, and insurance producers in disputes both in court and before the Maryland Insurance Administration. She can be contacted by phone at 410-339-6759 or email at mailto:plambert@pklaw.com.

 

[1] Greg E. Mitchell, Esq., NAIC Review of Limited Lines Producer License Update, Federation of Regulatory Counsel, Mar. 5, 2019, http://www.forc.org/Public/Journals/2013/Articles/Fall/Vol24Ed3Article3.aspx.

[2] Section 321 required a majority of states, not later than three years after the effective date, to enact: (1) uniform laws and regulations governing the licensure of individuals and entities authorized to sell and solicit the purchase of insurance within the state; or (2) reciprocity laws and regulations governing the licensure of non-resident individuals and entities authorized to sell and solicit insurance within those states.  Gramm-Leach-Bliley Act § 321; Mitchell, supra.

[3] “‘Limited lines insurance’ means: (1) limited line credit insurance; (2) the lines of insurance described in §§ 10-122 through 10-125 of this subtitle; (3) insurance sold in connection with, and incidental to, the rental of a motor vehicle under Subtitle 6 of this title; or (4) any other line of insurance that the Commissioner considers necessary to recognize for the purpose of complying with § 10-119(d) of this subtitle.”  Md. Code, Ins. § 10-101(h).  “Notwithstanding any other provision of this subtitle, a person licensed as a limited line credit insurance producer or other type of limited lines insurance producer in the person’s home state is entitled to receive a nonresident limited lines insurance producer license, pursuant to subsection (b) of this section, granting the same scope of authority as granted under the license issued by the person’s home state.”  Md. Code, Ins. § 10-119(d).

[4] Md. Code, Ins. § 10-122 (“Without regard to the education, experience, or examination requirements of this subtitle, the Commissioner may issue a limited lines license to an individual who or a business entity that sells travel insurance.”).

[5] Md. Code, Ins. § 10-101(f).

[6] Md. Code, Ins. § 10-124 (“[T]he Commissioner may issue a limited lines license to an individual who is employed by a health maintenance organization solely to solicit membership in the health maintenance organization under a contract:  (1) between the health maintenance organization and the Maryland Department of Health; and (2) in accordance with which the Maryland Department of Health obtains prepaid comprehensive health care services for recipients of medical assistance under § 15-105 of the Health-General Article.”).

[7] Md. Code, Ins. § 10-125 (“[T]he Commissioner may issue a limited lines license to an attorney who solicits, procures, or negotiates title insurance contracts to act as a title insurance producer.”).

[8] Md. Code, Ins. § 10-704

[9] Md. Code, Ins. § 10-602.

[10] “The purpose of this subtitle is to promote the public welfare by creating a comprehensive legal framework within which travel insurance may be sold in the State. . . . All other applicable provisions of this article apply to travel insurance, except that specific provisions of this subtitle supersede any general provisions of this article.”  Md. Code, Ins. § 19-1002(a), (c).

[11] Compare Travel Ins. Model Law § 3 with Md. Code, Ins. § 10-101(o)(1), (2).

[12] Compare Travel Ins. Model Law § 4(B) with Md. Code, Ins. § 10-122(d)(1).

[13] Compare Travel Ins. Model Law § 4(B) with Md. Code, Ins. § 10-122(d)(1)(iii), (vi).

[14] Compare Travel Ins. Model Law § 4(B) with Md. Code, Ins. § 10-122(d)(1)(vi).

[15] Compare Travel Ins. Model Law § 4(F) with Md. Code, Ins. § 10-122(d)(5).

[16] Md. Code, Ins. § 10-122(d)(2)(ii) (A travel retailer offering or disseminating travel insurance on behalf of a limited lines travel insurance producer shall make available to a prospective purchaser brochures or other written materials that . . . explain that the purchase of travel insurance is not required in order to purchase any other product or service from the travel retailer. . . . ”).

[17] R.I. Gen. Laws, Ins. §§ 27-77-1—7 (2013).

[18] State Updates, Am. Soc. Travel. Advisors (2014), https://www.asta.org/Government/content.cfm?ItemNumber=2816.

[19] Ala. Code §§ 27-7-1, 27-7-5.2(a)(2) (2018); see also Al. H.B. 113 (2012).

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