1. $tuff Happens: Airlines Benefit Handsomely From the Unexpected and Consumers Fears About It September 23, 2013

2. National Consumers League $tuff Happens 2 Acknowledgments This report was written by John Breyault, Vice President of Public Policy, Telecommunications and Fraud for the National Consumers League. Major assistance was provided by NCL staff, especially public policy interns Sam Hamer (Yale 14), Robert R.J. Smith (IUP 14) and Heather Yoon (Brandeis 15). About the National Consumers League The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org. National Consumers League 1701 K Street, NW Suite 1200 Washington, DC 20006 Phone: (202) 835-3323 Fax: (202) 835-0747 http://www.nclnet.org 2013 National Consumers League. All rights reserved.

3. National Consumers League $tuff Happens 3 Table of Contents Introduction .............................................................................................................................. 4 I. Cancellation and Change Fees Have Become Significant Profit Centers for the Airline Industry .......................................................................................................... 6 II. Refundable Tickets Are Not Affordable for Most Consumers ............................ 7 III. Marketing of Travel Insurance Online Does Not Give Consumers Adequate Information ...................................................................................................................... 10 IV. Complaints Suggest a High Degree of Consumer Confusion and Anger Regarding Limitations of Travel Insurance .......................................................... 17 V. Lack of Regulation of the Travel Insurance Industry at State and Federal Levels Leaves Consumers Vulnerable ..................................................................... 20 VI. Common-Sense Reforms Should Address the Lack of Consumer Protections in the Airline Travel Industry .................................................................................... 21 Conclusion ............................................................................................................................... 23

4. National Consumers League $tuff Happens 4 Introduction Life is full of uncertainties. When it comes to airline travel, this uncertainty can quickly become costly for consumers. Earlier this year, cancellation/change fees on the legacy U.S. airlines increased to $200 per ticket for domestic flights. These fees have become a growing revenue source for the industry. In 2012, the industry collected more than $2.5 billion in such fees, an increase of more than 176% since 2007.1 Many travelers approach buying an expensive plane ticket with fear and loathing, knowing that if something unexpected happen, they could lose a large chunk of money. An unexpected hospital visit, for example, could easily lead to $800 or more in cancellation or change fees for a family of four travelling together. As cancellation fees increase, consumers appear to be increasingly turning to travel insurance as a hedge against the risk of change fees and the alternative of expensive refundable tickets. From 2006-2012, sales of travel insurance and travel assistance products increased by approximately 46% to nearly $1.9 billion. Trip cancellation/interruption policies -- the type most often marketed to consumers by airline Web sites and online travel agencies -- accounted for 94% of travel insurance premiums in 2012, an increase of more than 22% since 2006. Unfortunately, the marketing of travel insurance through airline and online travel agency Web sites too often relies on misleading language and dense policy descriptions. Consumers often find that coverage they thought they had purchased to protect them in the event of a cancellation is denied. Policies are often riddled with exclusions, including for pre-existing conditions and many other reasons. This has generated a significant amount of consumer outrage. 1 Bureau of Transportation Statistics, Schedule P-1.2

5. National Consumers League $tuff Happens 5 To address the linked issues of onerous cancellation fees, unaffordable refundable tickets and misleading travel insurance marketing, the National Consumers League is recommending a series of reforms to protect consumers. These include: Congressional oversight hearings examining the windfall that the airline and travel insurance industries have realized from the startling increase in cancellation fees, the disparity between refundable and non-refundable ticket prices and the correlating increase in the sale of often useless airline flight cancellation insurance; Moving to a tiered cancellation/change fee pricing model based on the proximity of the travel date. Flights changed or cancelled more than 5-10 days in advance of the flight should incur no fee; Allowing consumers to transfer a ticket to another passenger without incurring a cancellation/change fee; Requiring travel insurance issuers to report the loss ratio, i.e. the percentage of premium claims paid out to customers buying insurance; Requiring travel insurance policies to be marketed in clear, non-misleading language; and Eliminating standby fees for travellers who miss a flight and elect to fly standby the same day because there is virtually no cost to the airline to fill an empty seat.

6. National Consumers League $tuff Happens 6 I. Cancellation and Change Fees Have Become Significant Profit Centers for the Airline Industry The fact that events happen beyond our control today results in a windfall for the airline industry. According to the U.S. Department of Transportation, the top 14 domestic airlines collected more that $2.5 billion in cancellation and change fees in 2012. This represents an increase of more than 176% since 2007, when the industry reported slightly more than $915 million in such fees. Source: Bureau of Transportation Statistics, Schedule P-1.2 Some members of the airline industry appear to depend on these ancillary fees, such as cancellation/change fees, baggage fees, seat selection fees and other fees to maintain profitability.2 In addition to the more than $2.5 billion in revenue from 2 Mutzabaugh, Benjamin. Airlines collected record baggage fees in 2012, USA Today. May 15, 2013. Online: http://www.usatoday.com/story/todayinthesky/2013/05/14/airlines-collected-record-baggage-fees- in-2012/2158983/ (The airlines took in $159.5 billion in revenue last year and had expenses of $153.6 billion, according to the government. That 3.7% profit margin comes entirely from the baggage and change fees.) 0 500000 1000000 1500000 2000000 2500000 3000000 2007 2008 2009 2010 2011 2012 Year U.S. Airline Cancellation/Change Fee Revenue - Reaches $2.5 Billion in 2012 Revenue (in millions of dollars)

7. National Consumers League $tuff Happens 7 cancellation/change fees, the industry collected more than $3.43 billion in baggage fees in 2012 alone.3 Domestic airlines have been flying with progressively fewer unsold seats. In 2002, the average load factor for a domestic flight was 70.41%. By 2012, average load factors reached 83.25%.4 The airline industry claims that higher change fees are a way to protect against revenue dilution.5 However, given increasing load factors, it seems dubious that the uncertainty of consumer itineraries is responsible for large blocks of unsold seats. Indeed, on a full flight, if a consumer has to change her plans, and informs the airline, that newly available seat becomes available for sale. Since tickets sold closer to the departure date are typically priced higher than tickets sold well in advance, the airline can profit twice over from a cancellation once from the cancellation/change fee, and again from the subsequent resale of the same seat. II. Refundable Tickets Are Not Affordable for Most Consumers Cancellation fees are an unavoidable fact of air travel for consumers who have a change of plans. One reason for this is the large disparity in price between traditional restricted fare tickets and refundable tickets (also known as full fare or unrestricted tickets). Nonrefundable restricted-fare tickets comprise the lions share of ticket sales for U.S. air travelers. Since 1993, restricted fare tickets made up more than 80% of all ticket sales across all fare classes (coach, business, and first classes combined). 6 3 DOT Bureau of Transportation Statistics. Baggage Fees by Airline 2012, Online: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/subject_areas/airline_information/baggage_ fees/html/2012.html 4 Bureau of Transportation Statistics T-100 Segment data. 5 Elliott, Christopher. Whats Behind All Those Airline Change Fees? Frommers.com. November 1, 2010. Online: http://www.frommers.com/articles/7070.html#ixzz2W1mopAIJ 6 Bureau of Transportation Statistics. Origin and Destination Survey: DB1BCoupon. (Accessed September 4, 2013) Online: http://1.usa.gov/150g5tf

8. National Consumers League $tuff Happens 8 Source: Bureau of Transportation Statistics. Origin and Destination Survey: DB1BCoupon There appear to have been significant fluctuations in the sales of refundable unrestricted fare tickets. In 1998, unrestricted fare tickets made up 19.48% of all ticket sales. Sales of such tickets gradually decreased until in 2009 when only 5.16% of tickets sold were refundable. Since 2009, unrestricted ticket sales have increased progressively. From 2011-2012, for example, sales of unrestricted-fare tickets more than doubled to 18.62% of all tickets sold. Whether this is due to consumers increasingly opting for such tickets in the face of increasing cancellation/change fees is unclear. However, it appears that there is at least a correlation between the two market trends. What is clear is that unrestricted, refundable tickets are significantly more expensive than restricted, non-refundable tickets. An NCL analysis of the least expensive refundable and non-refundable fares available for the top 100 air corridors in the U.S.7 found that on average, a refundable ticket is 350% more 7 Tomer, Adie and Puentes, Robert. Expect Delays: An Analysis of Air Travel Trends in the United States, Metropolitan Policy Program. Brookings Institution. (October 2009). Appendix 3 Top 100 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% Restricted-Fare Tickets Dominate Airline Ticket Sales Restricted Tickets (% of total passengers) Unrestricted Tickets (% of total passengers)

9. National Consumers League $tuff Happens 9 expensive than a non-refundable ticket.8 Given this price difference, it is not surprising that refundable tickets make up a comparatively small percentage of total U.S. ticket sales. The cost is simply prohibitive for most consumers. Source: National Consumers League (2013) Corridors, pg. 28-30. Online: http://www.brookings.edu/~/media/research/files/reports/2009/10/08%20air%20travel%20to mer%20puentes/1008_air_travel_report.pdf 8 Methodology: NCL conducted online searches on each of the top 100 U.S. air corridors as defined by Brookings using one of three online travel search engines (Priceline.com, Expedia.com and Travelocity.com) as well as Southwest.com (because Southwest Airlines does not provide its data to third-party online travel search engines). For each route, two searches were conducted; one for the lowest restricted fare and a second for the lowest unrestricted fare. Searches were conducted on September 5, 2013 for flights on October 7, 2013 (30-day advance purchase) for one-way coach-class tickets. Where possible, searches encompassed all airports in a metro area (e.g. WAS airport code for all Washington, DC airports or NYC for all New York City area airports). When a search engine did not allow for region-wide searches, the airport closest the city centers was chosen (e.g. SFO for San Francisco-area airports, LGA for New York City-area airports). In several cases, Southwest only serves one airport in a city (e.g. MDW in Chicago, Islip, NY for the Boston-New York corridor) so only flights to those airports were chosen. The percentage difference between the lowest restricted and unrestricted fare for a particular corridor was then calculated. The 350% figure is the average of these percentage differences for the top 100 corridors. 56 20 10 8 6 0 10 20 30 40 50 60 0-249% 250-499% 500-749% 750-1000% >1000% No. of Routes Non-restricted/Restricted Fare Difference % % Differences Between Non-Restricted & Restricted Fares on Major U.S. Air Routes

10. National Consumers League $tuff Happens 10 III. Marketing of Travel Insurance Online Does Not Give Consumers Adequate Information The trend towards rising cancellation fees has been widely reported, prompting calls for reform.9 Less well understood, however, is that growing revenue from travel insurance sales is also contributing to airline industry bottom lines. This amounts to a double-whammy on consumers. As cancellation fees have increased, consumer may feel compelled to buy insurance. In 2012, 148 million American insured purchased some form of travel insurance or travel assistance product, spending $1.9 billion on such policies and services, an increase of more than 46% since 2006.10 Trip cancellation/interruption policies, the type most often marketed to consumers by airlines and travel Web sites, accounted for 94% of travel insurance premiums in 2012, an increase of nearly 22% since 2006.11 0.00%$ 10.00%$ 20.00%$ 30.00%$ 40.00%$ 50.00%$ 60.00%$ 70.00%$ 80.00%$ 90.00%$ 100.00%$ $0$ $200$ $400$ $600$ $800$ $1,000$ $1,200$ $1,400$ $1,600$ $1,800$ $2,000$ 2004$ 2006$ 2008$ 2010$ 2012$ U.S.$Travel$Insurance$Sales$(in$Millions$$)$ Trip$Cancella8on/Interrup8on$Policies$Becoming$a$Larger$Part$of$Growing$U.S.$Travel$Insurance$Market$ Travel$Insurance$&$Assistance$Products$Annual$Sales$ Tip$CancellaEon/Insurance$Packages$(%$of$total$sales)$ Source: U.S. Travel Insurance Association, Travel Insurance Market Survey (2004-2012) 9 See e.g. Trejos, Nancy. Schumer asks airlines to reverse flight change fees, USA Today. May 20, 2013. Online: http://www.usatoday.com/story/todayinthesky/2013/05/20/airline-flight-change- fee-charles-schumer/2326243/ 10 U.S. Travel Insurance Association. Travel Insurance Market Survey (2004-2012). Online: http://www.ustia.org/documents/travel-insurance-sales-show-steady-increase-9-12-11.pdf 11 Ibid.

11. National Consumers League $tuff Happens 11 Every airline Web site that NCL reviewed includes the option to purchase travel insurance as part of their ticketing checkout process. These policies are often aggressively marketed to consumers. This should not be surprising since airlines and travel agencies receive commissions on the sale of travel insurance policies. Commissions range from around 10%12 to more than 40%13 of the cost of the policy. Unfortunately, consumers being offered travel insurance are often not provided the information necessary to make an informed buying decision. This is largely due to confusing messaging on major airline ticketing Web sites where consumers are led to believe that travel insurance covers more unforeseen circumstances than it actually does. Research by NCL has shown that potentially misleading marketing of travel insurance policies is widespread in the airline industry. Significant issues encountered during the ticket-buying process on multiple airline Web sites and online travel agencies included: Use of vague terms such as worry-free, unforeseen expenses, and and more without adequate disclosure of significant plan limitations; Reliance on misleading testimonials; and Requirement of multiple clicks before dense, multi-page policy limitations information can be found. For example, NCL researchers reviewing Spirit Airs Web site (www.spirit.com) were offered a $434.79 ticket price for a coach-class one-way ticket from Baltimore 12 Saltzman, Dori. Sell trip insurance for peace of mind, yours & theirs, Travel Market Report. September 12, 2011. Online: http://www.travelmarketreport.com/retail?articleID=6300&LP=1 (Commission levels on insurance sales are high typically 20% to 28% from third party suppliers, and 10% to 12% from travel suppliers.) 13 Travel Professionals International. TPI Investments & Commissions, http://www.tpi.ca/associate_investment_commissions.asp

12. National Consumers League $tuff Happens 12 to Los Angeles (including one carry-on bag) on August 24, 2013. The following offer was presented during the ticket checkout process: Clicking through to the Description of Coverage or Show Coverage directs the prospective ticket-buyer to a nine-page PDF of Spirit Airlines Description of Coverage for the policy, which is underwritten by Travel Guard.14 This document lays out the schedule of benefits for this particular flight and lists important definitions and exclusions. For example, if the insured flyers spouse or parent died prior to the trip and the death was linked to a pre-existing medical condition, the insurer would not be required to pay a claim under this policy. It is for this reason that the use of the term worry-free, combined with a relatively low price of coverage ($14, or approximately 3% increase in total ticket price), is troublesome. The likely result is that many consumers simply check the box to purchase insurance without reading and understanding the policy, thinking they have bought peace of mind. Too often, consumers learn too late that their reason for cancellation is not covered and they cant collect on a claim. This problem is not limited to a single airline. For a one-way flight from Washington, DC (Reagan National) to Los Angeles on August 24, NCL researchers were quoted a base fare of $630.80 on Delta Airlines Web site (www.delta.com). At the end of the checkout process, Delta presented the following travel insurance offer: 14 Accessed online (August 23, 2013): http://www.travelguard.com/spirit/domestic.pdf

13. National Consumers League $tuff Happens 13 The $37.85 cost of the travel insurance policy, underwritten by Allianz Global Assistance, represented an approximately 6% increase on the total cost of the ticket. This offer is again problematic in a number of ways. First Peace of mind is only a click away, suggests that all a prospective ticket-buyer must do is click the Yes, Id like to purchase trip insurance button to receive complete coverage. Second, after describing four specific benefits of the policy, it is likely unclear to the typical consumer what Limitations apply means. Clicking on the Learn More link leads to the following pop-up window:

14. National Consumers League $tuff Happens 14 The text in this pop-up window is again promotional in nature, detailing the amounts of coverage and benefits of the plan, such as concierge and 24-hour hotline in addition to the monetary benefits and a Satisfaction Guarantee. The pre- existing medical condition exclusion is noted, but only in vague terms. To find the full details of the policy, the ticket-buyer is required to click through a second time on the terms, conditions and exclusions, link to access a 22-page Certificate of Insurance document prepared by Allianz Global Assistance.15 Example of exclusions in travel insurance policies reviewed by NCL included losses stemming from: Existing medical conditions affecting the traveller, a travelling companion or a family member; Pregnancy and childbirth; Scuba diving without a dive master; Participating in or training for any amateur sporting competition; Being fired if the termination is the travellers or the travellers companions fault. These and other exclusions give carte blanche to insurers to avoid paying out claims. For example, if a family purchased a travel insurance policy prior to departing on vacation and their child broke an arm at soccer practice and couldnt travel, a claim could be denied under the training for any amateur sporting competition, exclusion. Potentially misleading marketing of travel insurance also occurs on online travel Web sites. For example, when NCL researchers attempted to book a one-way flight for August 24 from Washington, DC (Reagan National) to Los Angeles through 15 Accessed online (August 23, 2013): https://www.allianztravelinsurance.com/documents/library/certs/TI_101_08_C_V2.pdf

15. National Consumers League $tuff Happens 15 Expedia for a U.S. Airways-operated flight, we were quoted a fare of $418.30. At the end of the checkout process, we were presented with the following travel insurance offer: Stonebridge Casualty Insurance Company underwrites the policy. Full details of the policy are available on the Expedia Cancellation Plan Web site16 and in an eight-page brochure.17 Multiple instances of the number 100% and the phrases peace of mind and Dont miss out! encourage consumers to click the Yes button without fully exploring the significant limitations on this plan. In addition, text stating No, I dont need travel protection and understand it isnt available after booking, suggests that consumers can only purchase travel insurance for the selected flight during the online checkout process. In fact, consumers are free to purchase travel insurance policies independently of the online ticket purchase process from a travel insurance agent. 16 Accessed online (August 24, 2013): http://www.expedia.com/daily/promos/travel_protection_plans/flight_cancellation.asp 17 Accessed online (August 24, 2013): http://media.expedia.com/media/content/expus/graphics/other/insurance/expedia_flight_cancella tion_plan.pdf

16. National Consumers League $tuff Happens 16 Finally, travelers booking flights on Alaska Airlines are presented with the following offer for travel insurance: Note the text, citing a 2012 USA Today article18, which states Travel insurance is peace of mind and doesnt have to cost a lot. This quote, which was also featured in a number of other airlines travel insurance offerings, suggests that USA Today has endorsed travel insurance as a good idea for consumers. In fact, the text is lifted from a quote by Sandy Wick, owner of Four Seasons Travel in Indianapolis, Indiana and Kellie Bishop, chief possibility officer at Travel Leaders/Cosmopolitan Travel in Charlottesville, Virginia. Given the fact that both Wick and Bishop are travel agents, and likely receive significant commissions from the sale of travel insurance policies, they can hardly be considered disinterested parties. Further, USA Today itself has in no way endorsed travel insurance as an option for consumers. NCL researchers reviewed the Web sites of a dozen U.S. carriers, including the four major domestic airlines as well as major online travel agencies. This review found that misleading practices in the marketing of travel insurance policies are widespread. Given increasing sales of travel insurance, potentially driven by rising 18 Yancey, Kitty Bean and Bly, Laura. Travel agents tips for stormy weather journeys, USA Today. October 30, 2012. Online: http://www.usatoday.com/story/dispatches/2012/10/30/hurricane- sandy-travel-agent-tips/1667173/

17. National Consumers League $tuff Happens 17 cancellation/change fees, there is a danger that misleading marketing of travel insurance may be causing consumers to buy policies under erroneous assumptions. The confusing nature of travel insurance marketing on major airline Web sites only exacerbates the likelihood of such uninformed purchases. IV. Complaints Suggest a High Degree of Consumer Confusion and Anger Regarding Limitations of Travel Insurance Consumer complaints aplenty confirm that misleading marketing of travel insurance is a significant problem for consumers, and thus, the industry. Catherine Markland of Whitney, Texas relayed the following story in March 2012: We purchased flight insurance with Access America Insurance -- now called Allianz -- for the super-saver flights from Dallas to Miami. In February I received an e-mail from Friendly Planet saying that the tour had been canceled due to too few participants. I was given the choice to receive a refund or to schedule another tour later in the year. I decided to reschedule. However, Access America denied the claim I made to cover the costs of changing the American Airlines flights, which was $137 for each of us. I had spoken to two representatives from Access America explaining what had occurred, and both encouraged me to file the claim since it was not my fault that the trip was canceled. The process was time-consuming. I have written a letter to Access America asking for a second review. I think Access America insurance is bogus at best since the trip was interrupted

18. National Consumers League $tuff Happens 18 because it was never started. What is the purpose of insurance if not to cover the unexpected?19 Consumers have also reported difficulties in getting their travel insurance claims paid by providers. A case in point is Jessica Kamzik of Black Rock, Connecticut whose father was diagnosed with stomach cancer in the summer of 2011. Kamzik cancelled her vacation and filed a claim with Access America Insurance (now doing business as Allianz). Unfortunately for Ms. Kamzik, Access America denied her claim due to the companys claim that her father had a pre-existing condition that was not covered by the policy. They refused to pay based on what they say is a pre-existing condition. They made this claim based on a doctors note that was first sent in, which stated that my father had symptoms two months prior to when he was diagnosed. Their insurance policy says that if the client had symptoms 120 days prior to when the policy was bought, the refund was void. Now, I understood this, so asked for verification from his doctor. His doctor sent in all the notes, explicitly stating that my father was very healthy prior to his cancer, and that any symptoms he had were not necessarily related to cancer. Yet, the travel insurance company still refuses to refund our money. I will continue to fight this, however, because I believe that Access America will do everything they can to scam buyers out of their money. I went back to each of my fathers doctors and had them confirm that my fathers symptoms 19 Elliott, Christopher. Travel Troubleshooter: Insurance Doesnt Cover My Trip Cancellation, Frommers. March 21, 2012. Online: http://www.frommers.com/articles/7641.html

19. National Consumers League $tuff Happens 19 were not related to his current condition (a terminal illness). Even with both doctors backing me up, Access America refuses to do the right thing.20 Cheryl Ellis of Lees Summit, Missouri offered a similar tale of a travel insurance issuer taking advantage of the pre-existing medical condition exclusion to deny a claim: We booked a trip to Cancun through Orbitz last year, and when we got to the last screen of the reservation, it offered us a travel insurance policy through Access America. We thought it would be a good idea to have insurance, so we bought it. Afterwards, we received a document with the specifics of our policy. I didnt read it because I didnt anticipate having to make a claim. But I was wrong. Shortly before our trip, my mother died unexpectedly. I called Orbitz, which referred me to the insurance company. An Access America representative told me to cancel the trip and suggested that I reschedule it. They promised they would take care of the claim. A few weeks later, Access America denied my claim for $951, because my mother suffered from high blood pressure. The death certificate listed the cause of death as being from natural causes. I didnt know a natural cause was a pre-existing medical condition.21 These arent isolated cases. The Better Business Bureau reports that more 513 complaints were investigated against a single travel insurance company (Allianz Global Assistance) in the past three years.22 Another large travel insurance issuer, 20 Elliott, Christopher. Why doesnt travel insurance cover dads illness? Elliott.org. January 16, 2012. Online: http://elliott.org/blog/why-doesnt-travel-insurance-cover-dads-illness/ 21 Elliott, Christopher. The Travel Troubleshooter: Is a natural cause a pre-existing condition? Elliott.org. April 8, 2011. Online: http://elliott.org/the-troubleshooter/the-travel-troubleshooter-is- a-natural-cause-a-pre-existing-condition/ 22 Better Business Bureau. BBB Business Review: Allianz Global Assistance. Online: http://www.bbb.org/richmond/business-reviews/insurance-companies/allianz-global-assistance- in-richmond-va-4001660

20. National Consumers League $tuff Happens 20 (Travel Guard Group, Inc.) has had 204 complaints lodged against it at the Better Business Bureau in the past three years.23 V. Lack of Regulation of the Travel Insurance Industry at State and Federal Levels Leaves Consumers Vulnerable Travel insurance, like most other forms of insurance, is regulated by individual states. However, regulations vary greatly from state to state. For example, in some states insurance commissions regulate licensing requirements while in other states regulations must be enacted by legislatures. The travel industry, led by the U.S. Travel Insurance Association (UStiA) with the backing of the American Society of Travel Agents, has worked since 2009 to eliminate state-by-state travel insurance regulations in favor of a weaker national standard issued by the National Association of Insurance Commissioners (NAIC) and National Conference of Insurance Legislators (referred to jointly at NAIC/NCOIL).24 This is part of a larger lobbying effort being undertaken in state legislatures across the country. For example, thanks to industry lobbying, travel agents in California can now offer travel insurance without a state-issued license by operating under the umbrella of their travel insurance providers license.25 Industry efforts to change regulations do not appear to have benefitted consumers. An important feature of robust consumer protection is to provide a vehicle for the 23 Better Business Bureau. BBB Business Review: Travel Guard Group, Inc. Online: http://www.bbb.org/wisconsin/Business-Reviews/insurance-travel/travel-guard-group-inc-in- stevens-point-wi-3000442/Complaints#breakdown 24 Rice, Kate. Travel insurance regs are easing, but still pose peril, Travel Weekly. March 11, 2013. Online: http://www.travelweekly.com/Travel-News/Travel-Agent-Issues/Travel-insurance-regs- are-easing-but-still-pose-peril/ 25 American Society of Travel Agents. California Travel Insurance Update, Press Release. March 1, 2013. Online: http://www.asta.org/News/PRDetail.cfm?ItemNumber=10129

21. National Consumers League $tuff Happens 21 resolution of consumer complaints to be resolved. Consumers who are dissatisfied with travel insurance providers have several options available to them for reporting problems, including the Better Business Bureau and state insurance commissions. However, it appears that insurance commissions consumer protection role is not well publicized. Since 2010, only 64 travel insurance complaints have been reported closed by NAIC.26 The UStiA simply refers complaints to the travel insurers consumer affairs contacts.27 This is like the proverbial fox guarding the henhouse. VI. Common-Sense Reforms Should Address the Lack of Consumer Protections in the Airline Travel Industry Even the most thorough preparation for a trip can be wrecked by unexpected events. Gouging consumers whose plans change due to family illness or other unforeseen events is not a good business model. It also appears that given rising cancellation/change fees and high refundable ticket prices, consumers may be turning to travel insurance policies as hedge against these penalties. Unfortunately, misleading marketing of these policies can lead many consumers to purchase coverage under false pretenses. To address these issues, NCL believes that a multi-faceted series of reforms must be undertaken. NCL recommends the following: 1. Travel insurance policies sold through airline Web sites or online travel agencies should be marketed in clear, non-misleading language Wording on travel Web sites for travel insurance policies should disclose in 26 National Association of Insurance Commissioners. Closed Confirmed Consumer Complaints by Coverage Type As of July 29, 2013, pg. 5. Online: https://eapps.naic.org/documents/cis_aggregate_complaints_by_coverage_types.pdf 27 U.S. Travel Insurance Association. UStiA Consumer Complaint Contacts. Online: http://www.ustia.org/contact/Complaints.aspx

22. National Consumers League $tuff Happens 22 large font and plain language important limitations to policies. Consumers should be told where they can find insurance coverage details and informed of the timeframe to purchase travel insurance. Consumers should not be pressured into purchasing travel insurance while shopping for airfares and should not be led to believe that these insurance products are only sold through the ticket checkout process. 2. Travel insurance loss ratios should be reported According to the UStiA, 17% of consumers who have purchased travel insurance file a claim at some point.28 But we do not know how many consumers are ever compensated when they file a claim. The industry should be required to publicly report the loss ratios of their policies, i.e. the percentage of premium dollars paid out in claims. 3. Tiered cancellation/change fees based on proximity of travel date The ability of an airline to sell a seat vacated due to a cancelled or changed ticket is greater with more lead time before a particular flight. This should be reflected in a tiered cancellation/change fee policy. Flights cancelled or changed more than 5-10 days prior to the departure date should incur no fee. 4. Consumers should be able to transfer their tickets without incurring a fee While some airlines accommodate consumer requests to transfer their unusable ticket to another traveller, this is not standard industry practice and is rarely easily done . With reasonable timeframes in place, consumers should be able to transfer their ticket to another person easily and without incurring a fee. 28 U.S. Travel Insurance Association. Survey Reveals Agents Play Key Role in Travel Insurance Purchases, Press Release. April 21, 2006. Online: http://www.ustia.org/news/articles/agents-key- role-survey.htm

23. National Consumers League $tuff Happens 23 5. Congressional oversight hearings should be convened to examine the growth in cancellation fees, disparities in the price of refundable and non-refundable tickets and misleading marketing of travel insurance are needed. The development of an official record regarding the industry practices detailed in this report will help shape necessary legislative or regulatory reforms to establish much-needed basic consumer protections. 6. Standby fees should be eliminated for missed flights. Consumers who elect to fly standby on the same day in the event of a missed flight should not be required to pay an additional standby fee, which is currently required by many airlines, since it costs the airlines virtually nothing to fill an empty seat. Conclusion There is always an element of uncertainty in consumers lives that can affect travel plans. We believe that airlines have increasingly hit consumers with ever-increasing cancellation fees and high-priced unrestricted fare tickets. In response, consumers have turned to travel insurance policies that are aggressively and deceptively marketed as protection on the sale of virtually every ticket sold. To address these linked issues, NCL calls on state insurance commissions, the U.S. Department of Transportation and Congress to examine what has become a regulatory black hole. The reforms proposed in this report would do much to rein in an industry reliant on high prices, punitive fees and penalties. This would improve consumer protections, enhance trust in the travel industry and benefit the traveling public.