As travel rebounds, travel agents are seeing a surge in bookings and inquiries. With popular destinations like Mexico, Italy, and the Bahamas topping the list for international travelers (1), the demand for travel services is higher than ever. This resurgence presents a prime opportunity for travel agents to ensure they have adequate professional liability (PL) insurance to protect their businesses.
Ensuring Adequate Coverage: A Broker’s Responsibility
For brokers serving travel agents, now is a good time to check in on clients to ensure they have adequate professional liability coverage. While some host agencies allow their independent contractors to be covered under their E&O policy, others require independent contractors to obtain their own.
The Concept of Moral Hazard: What Could Go Wrong?
When considering the insurance risks facing independent contractors, the term moral hazard is important. “Moral hazard” is based on the idea that insured parties will take more risks knowing their insurers will protect them against losses. For example, a car owner with theft insurance will become less vigilant about where they park, a salaried employee will tend to take longer breaks, and so on.
Real-World Scenarios: Mistakes and Mishaps
In the travel industry, a travel agency might accidentally quote a client $3,000 for a trip that really costs $4,000. The travel agent might overlook the mistake, because it means their client is booked and happy that they’re saving $1,000. However, insurance companies will call this a moral hazard and will not foot the bill.
Aside from cases of moral hazard, there are some mishaps that are completely unpredictable and leave both the travel agent and the client unhappy and at a loss, and the client decides to sue. In situations like this, an insurance provider will likely cover the cost.
Case Study: The Missed Cruise
For example, suppose the agent books a client for a cruise out of Vancouver. The agent tells the client they will not need any special visas. But when their flight is delayed, the client misses the cruise ship and has to catch up with it at the next port, in Mexico, which requires a special visa. They end up missing half of their cruise while things are straightened out and sues the travel agent for the cost of their trip. Since in this situation the travel agent could not predict the flight delay, it does not fall under moral hazard and would likely be covered by the insurance provider.
Legal Requirements: Do All Travel Agents Need PL Insurance?
In Canada, some, though not all, provinces have legislation requiring an agency to carry E&O insurance. While not required by law everywhere, travel agents may be in other situations that require E&O insurance. For instance, members of the Association of Canadian Travel Agents (ACTA) must have E&O insurance if they live in a non-regulated province. In addition, some host agencies require proof of E&O insurance before an independent contractor or agency can join.
Comprehensive Coverage: What’s Covered with SWG PL: Miscellaneous Professional Liability
SWG PL – Miscellaneous Professional Liability insurance offers a packaged E&O and CGL policy that covers a wide range of classes of business. Tailored E&O coverage protects small to large firms from a broad range of miscellaneous risks. SWG provides a Miscellaneous PL policy at competitive rates, bringing extensive knowledge and underwriting experience in professional liability.
Need more information or want a quote? Reach out to SWG’s underwriting team.
*Insurance coverage availability may differ between provinces.
* * Content is current as of the date of broadcast and is subject to change without notice.
Source:
1. 2024 Travel Trends.
