Draft Pending Adoption

Draft Pending Adoption Attachment Thirteen Property and Casualty Insurance (C) Committee 8/8/17 Draft: 8/15/17 Travel Insurance (C) Working Group Philadelphia, Pennsylvania August 5, 2017

The Travel Insurance (C) Working Group of the Property and Casualty Insurance (C) Committee met in Philadelphia, PA, Aug. 5, 2017. The following Working Group members participated: Al Redmer Jr., Chair, and Cathy Grason (MD); David Altmaier, Vice Chair (FL); Susan Stapp (CA); George Bradner (CT); Brian Bressman (DC); Paul Yuen (HI); Michael P. Rohan (IL); James J. Donelon, Tom Travis and Warren Byrd (LA); Angela Nelson (MO); Tracy Biehn (NC); John D. Doak, Tyler Laughlin and Buddy Combs (OK); John Lacek (PA); Elizabeth Kelleher Dwyer (RI); Brett Barratt (UT); Rebecca Nichols and George Lyle (VA); and John Haworth (WA).

1. Adopted its July 27 Minutes

The Working Group met via conference call July 27 and took the following action: 1) adopted its July 17 minutes; 2) heard a presentation from the Center for Economic Justice (CEJ) regarding the CEJ’s request to have the industry provide actual data on travel insurance sales, claims and complaints; and 3) discussed next steps regarding development of language for a proposed Travel Insurance Model Law. Superintendent Dwyer made a motion, seconded by Commissioner Doak to adopt the Working Group’s July 27 minutes (Attachment Thirteen-A). The motion passed unanimously.

2. Conducted a Section-by-Section Review of the Proposed NAIC Travel Insurance Model Act

Commissioner Redmer said the Working Group would review the proposed NAIC Travel Insurance Model Act (Model Law) section by section. He asked Denise Matthews (NAIC) to begin the review. Ms. Matthews reviewed the materials provided and said the section-by-section review would be based on the document reflecting a compilation of the comments to date.

a. General Comments

Ms. Matthews said the American Insurance Association (AIA) letter stated a preference for the regulation to stay consistent with existing state filing regimes and that too many consumer disclosures could cause confusion and possibly frustration so they indicated a preference to not add more.

She said the CEJ comments stated a need for the regulators to collect data to verify industry claims regarding bundling and to provide a better indicator of consumer outcomes than what is provided by consumer complaints. The CEJ letter also indicates the need for additional consumer disclosures.

Ms. Matthews said the Travel and Tourism Insurance Consumer Coalition (TTICC) comment letter disagrees with the contention by the CEJ that additional data is needed to develop the Model Law and that the data needed is already available and accessible to the state insurance departments.

She said the U.S. Travel Insurance Association (UStiA) comment letter mostly agreed with the language in the Model Act draft, indicating agreement with allowing the bundling of travel insurance and non-insurance travel services, the states using existing rating rules, use of the inland marine line of business for travel insurance reporting, coordination of benefits (COB) requirements not being appropriate and the language in regard to no cost insurance.

Ms. Matthews said the California Department of Insurance provided California’s Article 15 for reference by the Working Group and to support development of language for the Model Law and the Louisiana Department of Insurance provided the language adopted by the Louisiana State Legislature that reflects the revisions they made to the National Conference of Insurance Legislators’ (NCOIL) Travel Insurance Model Law (NCOIL Model Law).

Commissioner Donelon said, prior to the legislative session, he recommended the UStiA reach out to the travel and tourism groups and submit a bill. He said they started with the NCOIL Model Law and the insurance department did have some concerns, but the UStiA was able to alleviate them and the bill passed with its blessing. He said it passed the legislature unanimously. Commissioner Donelon said Mr. Travis would have additional detail on the changes that were made to the NCOIL Model Law. Mr. Travis said the changes Louisiana made to the NCOIL Model Law are accurately reflected in the comments document. © 2017 National Association of Insurance Commissioners 1 Draft Pending Adoption Attachment Thirteen Property and Casualty Insurance (C) Committee 8/8/17

Commissioner Redmer said there is a follow-up in process regarding acquiring data that may be available to support the Working Group’s development of the Model Law.

b. Consumer Disclosures

Ms. Matthews said Oklahoma and Missouri are still working on a recommendation related to consumer disclosures, so a final recommendation is not yet available. She said Commissioner Redmer, therefore, asked that the Working Group defer the discussion of consumer disclosures for a future meeting.

c. Section 2—Scope and Purposes

Ms. Matthews said the CEJ comment letter indicates that non-insurance travel services should be included and regulated by the insurance commissioner under this legislation. The letter provides the reasons why and the proposed language reflects that contention. She said the letter indicates disagreement with the language proposed by Oklahoma because it says non- insurance travel services would not be included.

The Independent Insurance Agents & Brokers of America (IIABA) comments regarding Section 2 reflect a minor change to eliminate what it refers to as unnecessary language that causes an inaccurate perception.

Ms. Matthews said the TTICC comment states it strongly disagrees with including any regulation of non-insurance travel services saying it would be duplicative as those products are already overseen by other entities.

She said UStiA’s comments are also unsupportive of including non-insurance travel services saying there is NAIC precedent for this position.

The Louisiana comments indicate Section 2(A) is unnecessary, noting that its legislation does not support including non- insurance travel services.

The Oklahoma mark-up adds new language with Section 2(C) and Section 2(D). Section 2(C) states this law would supersede other state insurance laws and Section 2(D) clarifies this law pertains to travel insurance products only.

Commissioner Redmer asked the members of the Working Group to discuss Section 2. Superintendent Dwyer agreed that Section 2(A) includes some unnecessary language. She said it could be enough to just have the first sentence, “The purpose of this Act is to promote the public welfare by creating a comprehensive legal framework within which Travel Insurance may be sold in this state.” In regard to the language suggested by Oklahoma, Superintendent Dwyer said the Section 2(C) language might help provide clarity, but she did not see the need to add the suggested Section 2 (D) language.

Commissioner Redmer asked the Louisiana representatives if they could provide background on why the Louisiana legislation eliminated that section completely. Mr. Travis said the legislation was presented to them with the section removed so he did not know for sure, but Louisiana generally does not put a lot of declaratory language in statute. Commissioner Redmer asked if any Working Group members had any concern with Superintendent Dwyer’s recommendation. Hearing none, he asked if there were comments from other stakeholders.

Birny Birnbaum (CEJ) said he would like to comment on whether the Model Law should cover only the insurance component of the travel protection plan or if it should also include non-insurance components. He asked if it makes sense from a consumer protection, regulatory efficiency or effectiveness standpoint, or if it promotes competition and empowers consumers. He said it makes sense for regulators to have oversight of the entire package, because it makes sense from an efficiency standpoint to be clear about that up front, as opposed to after the fact through a market conduct exam or through litigation. He said to do so would prevent regulatory arbitrage. He said it would ensure that someone is looking at the entire picture and prevent someone from playing one set of regulators against another. He also said the CEJ is not convinced there are really any consumer protection laws in place when it comes to things like cancellation waiver products. He said he does not think this hinges upon other state laws, because it would be done in concert with other state laws to ensure that at least someone is looking to ensure there are no gaps in the process and that is the reason regulators should have oversight of the entire package. 2 Draft Pending Adoption Attachment Thirteen Property and Casualty Insurance (C) Committee 8/8/17

Superintendent Dwyer said there have been a series of cases on debt cancellation agreements. She asked Mr. Birnbaum if he had any analysis or proposals regarding how to determine standard jurisdiction in those types of cases. Mr. Birnbaum said those cases were an issue of debt cancellation having to do with contract exclusions and what happened was that federal regulators said the debt cancellation contract is a banking contract and, therefore, insurance regulators do not have oversight, further noting that because it is not an insurance product, there is no preemption issue. He said in the case of the travel protection plan product, the states can determine what is or is not insurance in much the same way they determine what is and is not an extended warranty. He said the insurance regulator may well determine a component of the travel protection plan is not insurance, but he said the insurance regulators should be the ones making that determination. He said it should not be determined by the courts during litigation after the fact as a result of a market conduct exam. He said identifying what is and is not insurance should be the type of regulatory efficiency desired, and the states have the authority to do so and be clear about it up front.

Commissioner Doak asked Mr. Birnbaum for clarification regarding his comments on travel insurance related to Wells Fargo. Mr. Birnbaum said the way the Model Law is set up (i.e., defining some pieces to be travel insurance and others not to be) will result in regulators not having authority to oversee those non-insurance pieces resulting in regulatory arbitrage. He said problems like that can happen where those types of products are combined and when there is something like force-placed insurance, where the lender is not a licensed insurance producer, it can result in situations like the Wells Fargo where force- placed auto policies were erroneously initiated. In that case, the practice was not identified by the banking regulator, perhaps because they thought it was insurance and, therefore, the responsibility of the insurance regulator. He said if the regulatory responsibility would have been clearly identified, perhaps that gap would not have existed. Commissioner Doak said he disagreed, but thanked Mr. Birnbaum for the explanation.

Commissioner Redmer said the consensus is to delete the language in Section 2(A) after the word “state.” He then asked for discussion of Section 2(B). He said the CEJ suggested eliminating the language after “Related Services.” He said the IIABA suggested deleting the words “where policies and certificates are delivered or issued for delivery in this state.” Louisiana eliminated the language that states “whether or not provided as part of a Travel Protection Plan.” He said those were the only suggested modifications.

Commissioner Redmer asked Mr. Travis to explain the thinking behind deleting that language. Mr. Travis said there cannot be travel insurance outside of the travel protection plan per the definition of “travel protection plan”; therefore that language is not necessary. Commissioner Redmer said there seems to be agreement to delete that language.

Commissioner Redmer then asked Wes Bissett (IIABA) to comment on the IIABA’s suggestion to delete “where policies and certificates are delivered or issued for delivery in this state.” Mr. Bissett indicated he considered that to be a technical edit and the goal was to ensure that the terms of this Model Law would apply to someone who is securing travel insurance coverage. He said the way the IIABA reads this is that it would only apply if the person is an end user and is actually issuing a specific formal policy or certificate. He said policies and certificates are not always issued until the end of the process by the person that is securing the policy; therefore, the IIABA recommends that this Model Law apply to all travel insurance transactions and not be conditioned on whether there is a specific policy or certificate delivered or issued for delivery in a particular state. He said there are different ways to get at this issue and offered some language alternatives.

Commissioner Redmer asked if there were any questions. Superintendent Dwyer asked if there is not an argument that if the language is removed, someone could claim that a certificate delivered in your state would not fall under this act because the actual word “certificate” is not used. She said the argument would be that the only entity that would have jurisdiction over the product would be where the policy was delivered. Mr. Bissett said the IIABA is suggesting deleting the whole phrase, so the reference applying to policies or certificates would be removed altogether. Superintendent Dwyer said there can be an argument that a certificate does not give jurisdiction to the state of the person receiving the certificate. Mr. Bissett said there is language in Section 8 and Section 9 that may work to resolve this, and he would be willing to submit a couple of alternatives to the Working Group.

Commissioner Redmer said there seemed to be consensus around deleting that phrase, as long as there are no other unintended consequences associated with it and it might be able to be addressed with something else later in the Model Law. Commissioner Altmaier said the Working Group should leave it in and deal with it in later sections when the discussion about whether to require the delivery of the certificate takes place. He said some affirmative statement is needed regarding

© 2017 National Association of Insurance Commissioners 3 Draft Pending Adoption Attachment Thirteen Property and Casualty Insurance (C) Committee 8/8/17 what the state’s jurisdiction is and, once that is determined, there will be a need to go back to Section 2(A) to be sure the language is consistent because it uses the term “sold.”

Ms. Matthews confirmed that the Working Group agreed to go with the revisions to the first sentence of Section 2(B) as adopted by the Louisiana State Legislature. Regarding the second sentence in Section 2(B), Mr. Birnbaum said it does not make sense to say the Model Law does not apply to those things, because those things are still to be defined, including whether to treat them as insurance. Commissioner Redmer said Mr. Birnbaum raises an interesting point and asked the Working Group members if the language is needed. Greg Mitchell (Tourism and Travel Industry Consumer Coalition— TTICC) said it was included for clarity. He said it clarifies that the Model Law does not apply to non-insurance pieces of the product such as cancellation fee waivers. Mr. Combs said if the travel insurance definition said “including, but not limited to” that might imply it applies to cancellation fee waivers and travel assistance services, so by specifically excluding them, it makes it clear what is intended. The Working Group agreed to leave the language as-is for now, as there was no consensus regarding whether to delete it.

Mr. Combs reviewed the suggested language from Oklahoma regarding Section 2(C) stating that general provisions in the insurance code will continue to apply to travel insurance, except where it is preempted by the terms of this statute. Commissioner Redmer asked for questions or comments. Mr. Travis said he had no problem with the language, but asked if it is necessary. Mr. Combs said there are some laws on the books already that apply to travel insurance and the intention is to make sure that, in the event there is any conflict, this law would take precedence; however, he said Mr. Travis’ point is well taken, because the most recent statute will generally supersede others. Ms. Grason said it is a good idea, because it will clarify the legislative intent and it does not hurt anything. Commissioner Redmer asked for other comments. Hearing none, he said the next draft of the Model Law will include the suggested language for Section 2(C) submitted by Oklahoma.

Mr. Combs said the suggested language for Section 2(D) is again just to clarify intent. Superintendent Dwyer expressed concern that this language could “muddy the waters” and said it is unnecessary. Mr. Combs said Oklahoma is used to putting “extra intent” into legislation because of the way its process works, but he understands not all states operate that way. Commissioner Redmer asked for comments. He said the consensus was not to include the suggested language labeled Section 2(D).

Ms. Matthews introduced an additional document that reformatted the definitions to reflect comments by term, as opposed to comments by commenter. She proceeded to summarize the comments of each of the commenters for the term “eligible group,” beginning with the AIA’s comments. She said the AIA has expressed support for the current definition, but offered some revisions that basically serve to clean up the language and offered more items for the definition to expand it for clarification. She said the CEJ offered suggestions and opinions about the definition, but did not appear to offer any specific language. She said the UStiA offered some additional information regarding current state laws that offer permissible group definitions, but no specific language revisions. She said Louisiana’s comment is related to a question of whom they are covering. Mr. Travis said it is not clear, and he suggested rewriting it to determine who all of these different entities cover. Commissioner Redmer asked if it really matters who is covered, as long as the company knows the class of people covered. Mr. Birnbaum said the reason is to prevent sham groups that have no real nexus of interaction among the members other than the purchasing of a group travel protection plan. He said simply referencing the term “group” in statute is irrelevant, noting that what is needed is to determine how best to define “group” so that it is more than just a group of people wanting to purchase insurance. He said that is the issue to be addressed, but no specific language has yet been suggested that meets the intent.

3. Discussed Next Steps

Having reached the end of the meeting time, Commissioner Redmer suggested the process used seems to work and will be used going forward. He said if there were any suggestions on how to improve the process and make it more efficient to let him know. Mr. Birnbaum suggested an in-person interim meeting to work through the rest of the Model Law draft. The Working Group agreed to consider that suggestion.

Having no further business, the Travel Insurance (C) Working Group adjourned.

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