Ready for Takeoff.

The travel insurance industry looks to the increasing number of leisure travelers to boost sales.

Travel agents, faced with dwindling commission rates on ticket sales and declining use of their services, have turned to selling travel insurance to make a profit. It's a trend that could present new opportunities for insurers.

Travel Guard International has been selling travel insurance since 1985. Its policies are underwritten by Ace USA, and its main channel of distribution is through travel agencies.

Air travel is on the rise, and there is more strain on the travel industry to meet customer demands. Travel Guard says sales of travel insurance will continue to grow as more people travel. "Because more people travel than ever before, together with increased factors that can impact travel, we do believe this is just the tip of the iceberg for travel insurance sales, especially to leisure travelers," said Dan McGinnity vice president of communication and services at Travel Guard International.

McGinnity envisions agents in the United States selling travel insurance to their personal-lines customers. "It makes sense for agents to sell travel insurance to the clients [to whom] they sell homeowners and auto insurance policies. It's a natural extension," he said.

In more mature markets, such as Europe, sales of travel insurance will move from the travel sector to financial-services institutions, including insurers, and eventually to new channels of distribution, such as retailers of consumer goods, said Trevor de Vries, a member of the executive committee with responsibility for North America at Elmonda Group, an indirect subsidiary of the German insurance group Allianz AG.

Elmonda, which includes Elvia Travel Insurapce and Mondial Assistance, recorded double-digit sales growth in 1999. Consolidated sales were 658 million euro ($597.7 million), which represents a growth rate of 19% compared with 1998 and an after-tax profit of 15 million euro. This year also looks promising for Elmonda, which is forecasting another year of double-digit growth in its business of travel assistance and related insurance.

When travel agents try to sell insurance, questions arise about licensing regulations and who is permitted to sell insurance. McGinnity said Travel Guard is aware that licensing is handled differently from country to country and, in the United States, from state to state. So it tries to help agencies address these issues. Travel Guard also provides some refunds for licenses.

In the European Union, distribution and sales regulations aimed at protecting customers apply to travel insurance. In Belgium, the law is very specific about who can sell travel insurance. All insurance intermediaries, including travel agents, must register with the Office de Controle des Assurances. This is the life and nonlife supervisory governing body of the insurance industry in Belgium.

The industry is highly regulated, and travel agents must publicly display their registration number, pay annual fees, have specific knowledge about products and carry civil liability insurance.

Better-Than-Average Margins

"While it may not be as glamorous as going to review a resort, travel insurance provides better-than-average margins than the sale of travel services, and travel agents will want to sell it," said Wautier Robyns, spokesman for the Belgian Insurance Companies, a trade association.

Furthermore, in Belgium, all insurance intermediaries must appoint one person for each travel agency to take responsibility for distribution. That person must have the technical knowledge about regulations pertaining to insurance contracts. Additionally, this branch representative must have some practical experience in insurance sales and have either a university degree or technical training in insurance products.

When Ticket BBL Travel began selling travel insurance in Belgium in June 1997, travel agents received individual training to start and participated in group training in the following years.

Bob Van Damme, contract manager at Ticket BBL Travel, said the training investment has resulted in a high return. Travel insurance sales in 1999 were up 32%, while the increase for the period through April 2000 was 52%.

Ticket BBL Travel sells two types of contracts. The first is from Elvia Travel Insurance, and the other is an exclusive policy from the Belgian National Automobile Association.

"The advantage of having two contracts allows us to earn additional revenue as well as very attractive commissions, and it allows us to provide better service to our customers," Van Damme said.

In Germany, travel-cancellation insurance sells well, but other travel insurance policies, such as those that cover health emergencies, are less popular. One reason for this might be recent reforms in Germany's healthcare system, which provides medical insurance to German nationals when they travel abroad.

There also are several new competitors in Germany. Companies offering comprehensive assistance benefits are rushing to get in on what they see as new opportunities in the industry. Elmonda is an aggressive player, but in contrast to some of its competitors, Elmonda works extensively with corporate clients in travel.

"Both in Europe and in the U.S. there is an opportunity for more widespread travel insurance sales, particularly on annual policies, which are better for insurance companies because they offer more efficient administration" de Vries said.

Europaische, the third-largest travel insurer in Germany, is planning to introduce vending machines that sell travel insurance at airports.

With a growing percentage of travel booked electronically, more travel insurance is likely to be sold over the Internet. Still, travel insurers like Europaische depend heavily on travel agents to sell their products. The partnership insurance companies have with the tourism industry, and especially with travel agencies, will continue to be the basis for selling travel insurance in the future, said an official at Europaische.

The same is true for Travel Guard. "Our main channel of distribution has been travel agencies," McGinnity said. But as Travel Guard seeks to sell travel insurance products outside the United States, "we will turn to the Internet to do this," he said.

Wendy B. Schatzman is a Brussels-based correspondent for Best's Review.