On February 16, 2016, Richard J. Badolato, Acting Commissioner, State of New Jersey Department of Banking and Insurance (Department), issued Bulletin No. 16-02 advising the marketplace that the Department considered an opt-out or automatic enrollment process with respect to web-based travel insurance sales as an unfair method of competition and a deceptive trade practice in violation of N.J.S.A. 17:29B-4. The Department is requiring that the practice be halted by any carrier engaging in such practice and that restitution be paid to customers. The Bulletin is linked here.
The National Association of Insurance Commissioners (NAIC) has been evaluating travel insurance issues, and various states have initiated market conduct examinations for carriers writing travel insurance to evaluate business practices, including those addressed in the Department’s Bulletin No. 16-02. Specifically, upon assessing certain of those web-based travel services, consumers confirm flights by selecting a destination and dates of travel. After making a flight selection, consumers have an opportunity to review the selection made which includes the purchase of travel insurance. In order to opt out of the purchase of travel insurance, consumers must affirmatively make that election. If a consumer does nothing, he is automatically enrolled, and the cost of the travel insurance is included in the total purchase price. It is this automatic enrollment and associated fees to which regulators object.
New Jersey’s actions, as memorialized in the Bulletin, are consistent with action taken in other states, including Minnesota, Washington and Missouri. Whether New Jersey will join other states and initiate market conduct examinations for those carriers who write substantial travel insurance programs remains to be seen.