Unless they specifically opted out of the insurance, customers were buying policies that cost $25 to $45 per traveler, according to the state. The companies have agreed to issue nearly $2.5 million in refunds and pay a $250,000 civil penalty.
And in January, the Transportation Department’s new full-fare advertising regulations for airfares went into effect. They include a rule that prohibits so-called opt-out provisions in ads, further closing a loophole that had cost consumers millions and generated thousands of complaints.
No surprise, then, that online agencies are slowly backing away from the practice.
“Opt-outs are no longer being presented to consumers via our member companies to the extent that they were offered before,” says Joseph Rubin, president of the Interactive Travel Services Association, which represents the major online travel agencies, including Travelocity.
To get a sense of what was wrong with opt-out, let’s rewind to a 2010 column of mine on this subject. In it, I spoke with customers who booked airline tickets online only to discover that a box indicating that they also wanted to buy optional travel insurance had been pre-checked. I interviewed Terri Widder, a retiree from Carol Stream, Ill., who bought American Airlines tickets through a site operated by Travelocity. She nearly ended up with precisely the same insurance that Minnesota took action against: a Travel Guard policy.
At the time, a Travel Guard spokesman said that opting out instead of in was well on its way to becoming a “standard” in travel. He told me that the complaint rate on the company’s policies had been less than one-tenth of 1 percent.
A Travelocity representative also said that most of its customers — more than eight in 10 — uncheck the box before they click the “buy” button. If they had buyer’s regret, the site allowed for a refund within one credit card billing cycle.
Travelocity declined to comment on the Minnesota ruling, because it was not party to the settlement. (The online agency made its decision about opt-out marketing in consultation with the travel insurance companies, but the insurers approved the way in which their products were sold, according to Travelocity.) But the agency defended its opt-out practices.
“Travelocity believes that our 16-year track record of providing great values for consumers and being their advocate speaks for itself,” says Joel Frey, a company spokesman. “We viewed pre-checking travel insurance as a service to our customers, and we rarely received any complaints about it. We went out of our way to ensure that the manner in which we did that was not deceptive to our customers.”