Prime Travel Insurance Out of Business; Are Consumers Out of Luck?

February 9, 2009
Congratulations: You've protected your vacation investment by purchasing cruise travel insurance. But wait -- what happens if the insurance company goes kaput?

Cruise travelers holding policies from Colorado-based Prime Travel Protection are facing just that quandary. According to a statement on the company's Web site, Prime Travel Protection last week "initiated an orderly liquidation of services." In other words, it went bust. The short statement further says that customers will be contacted in writing with information on the processing and resolution of claims -- and that legal or court-appointed counsel will be handling all inquiries.

Customers holding a policy from Prime Travel Protection for an upcoming cruise do not have any trip protection at this time and will need to arrange for alternative coverage (and dispute with their credit cards any premiums paid).

Sounds simple enough, but there's one sticky situation to be aware of: Generally, in order to receive a waiver for a pre-existing medical condition, you have to buy insurance within 14 days of your initial trip deposit. If you've lost your waiver due to Prime's closing and are outside of the two-week window, you may have luck asking for an exception. Travel insurance provider Access America's Mark Cipoletti says exceptions would be considered on a case by case basis in light of Prime's demise. He recommends calling a reputable travel insurance company to explain your unique situation.

At least one travel agency is stepping in to help its clients; Best Price Cruises Vice President Ron Russo tells us that all customers who purchased or received for free a Prime policy with their booking through the agency will get a replacement policy at no charge to them from fully licensed provider iTravel Insured, Inc., an accredited business with the Better Business Bureau rated as "satisfactory."

Also, don't let the fact that Prime's policies were often thrown in as a freebie discourage you from looking for those kinds of perks. Some agencies are offering complimentary policies from major, reputable travel insurance companies. As published in this week's Cruise Critic E-Letter, Direct Line Cruises is offering Access America coverage with select bookings.

If Prime Travel Insurance sounds familiar to you, it's because Cruise Value Center, the major online cruise travel agency that went belly-up last fall, offered the insurer's policies to its customers. Prime has also surfaced on several message board threads by cruise travelers who've had trouble settling claims. Others have alleged that Prime wasn't licensed to sell insurance at all -- and that it called its product "travel protection" rather than "travel insurance" to avoid licensure.

We've seen the terms used interchangeably and there doesn't seem to be a concrete distinction between the two. "My understanding is that this company did not sell an 'insurance' policy," Travel Guard spokesperson Dan McGinnity tells us. "If someone's saying [their product] isn't insurance so they don't have to register as a licensed seller, that's telling me he's also not adhering to the standards a reputable seller is adhering to."

According to Insurance Information Institute spokeswoman Loretta Worters, what matters is that you buy the coverage you need (from secondary medical insurance that kicks in after your own to the ability to cancel a trip for any reason not excluded by your policy) from a reputable company.

So how do you know that your travel insurer is trustworthy? According to Worters, reputable providers offer policies that are underwritten by licensed insurers that are regulated by state insurance departments.

Many of these companies don't underwrite policies themselves, but have a state-sanctioned third party do so. For example, Access America's policies are underwritten by Virginia-based Jefferson Insurance Company; a quick search on Virginia's Bureau of Insurance Web page confirms Jefferson is indeed licensed in that state. TravelGuard's insurance is underwritten by National Union Fire Insurance Company, which is based and licensed in the state of Pennsylvania. You'll want to check your own state's insurance department to verify that a company is also licensed to do business there.

Interestingly, a cached version of Prime Travel Protection's Corporate Profile Web page, which has since been taken down, cites as its underwriter Ciela Capital Insurance -- a company we've found no record of to date. (Vacation Superstore Network, Inc., which operates Best Price Cruises, has said it will file action against Prime Travel Protection for misrepresentation of underwriting and state compliance. Their new provider iTravel Insured, which we already mentioned is in good standing with the Better Business Bureau, is underwritten by Delos Insurance, based and licensed in New York.)

If you don't want to do your own legwork, the United States Travel Insurance Association's Web site is a good all-around resource. All the companies that are listed as members of the USTIA subscribe to a rigorous code of ethics and are all legitimate, offering policies underwritten by licensed, and therefore highly regulated, insurance companies.

For more information on how to choose cruise insurance, read At Your Service: Travel Insurance -- Pros and Cons.

--by Melissa Baldwin Paloti, Managing Editor

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