Why Not Sell an Annual Travel Policy?

Leslie Saunders, president and owner of Leslie Saunders Insurance and Marketing International, discusses the possibilities of a travel protection offering for rental customers.

Is the car rental industry recognizing the way the customer thinks today? With all the choices available before the customer arrives at the counter or kiosk, do we really believe we can compete with the online offerings at sites like Expedia, Orbitz and Priceline? Why wouldn’t car rental companies have a private-labeled annual travel policy to offer their most loyal customers? This would immediately eliminate the protracted argument at the counter about credit cards, prepaid travel sites and the customer’s insurance.

You’d reach the domestic executive traveler, who books 30 or more car rental days a year and probably 10 or 20 days overseas annually. This customer is probably not purchasing the Loss Damage Waiver (LDW) offered by the car rental company or the travel site and is relying upon his or her credit card for coverage. Let’s consider the options available today.

In previous articles in Auto Rental News, we have examined credit cards and what they cover. Visa cards will provide coverage on a secondary basis (after the customer’s auto insurance policy) for collision or theft. American Express and MasterCard provide the same coverage to select types of cards and customers.

But there are difficulties for the credit card customer to receive payment for loss of use and administrative costs because the credit card companies ask for rental logs and proprietary information the car rental company does not wish to provide. This may leave the car rental customer with a large out-of-pocket balance to pay.

We know that purchase of the LDW offered by most car rental companies will relieve the customer of this responsibility. It is a fair exchange, especially if you do not own a vehicle and do not have a personal auto policy. It is also important to note that a portion of today’s rental fleets are luxury vehicles, and many credit card policies have exclusions for vehicles above a certain price.

Some exclude four-wheel drive vehicles, luxury SUVs such as Escalades or Navigators, or just have a price cap of $30,000 or $45,000. Did you just sell your customer on that big upgrade to a nice new Infiniti or Jaguar? Unless the customer opted for the LDW offered by the car rental company, there may not be coverage for that vehicle if it is stolen or damaged.

The LDW often gets a bad rap. It offers value to the customer, whose driving record or expertise we do not question. We relieve our customers of financial responsibility for our vehicle and its tires, rims and mirrors. We only ask for the conditions of the rental agreement to be met. But many customers just do not see the value in this or believe they have it covered elsewhere. Many customers will not purchase the LDW because they feel they are being tricked or deceived in some way.

Last week, I watched a rerun of the famous “Seinfeld” show, which has been shown at many Car Rental Shows and countless licensee conventions. I often show the YouTube version clip in my training classes. Today most rental service agents ask me, “Who are those people?”

Aside from the funny clothes and big shoulder pads, there is a lesson in this “Seinfeld” scene that is often skipped. We all remember the famous lines “You know how to take a reservation, but you don’t know how to keep a reservation, and that is the important part.”

The end of the show has the real message. After Jerry Seinfeld hires George Costanza to move his car to the other side of their street to comply with alternate side parking rules in NYC, the car is hit while George is driving, creating a traffic jam and ending his car-moving business. Jerry fills out the accident report, lists George as the driver and discovers he owes $2,800 in repairs because George was not an authorized driver. The scene is funny but true.

Credit cards cover the authorized cardholder but not other drivers, whether they are authorized on the contract or not. Customers often fail to consider who will be driving the car. When Jerry said he wanted the insurance because he was going to “drive the heck out of the car,” he forgot one small thing: George!

It is 2014; Jerry and George are getting older and balder and probably rent their cars online. What are the available options for them? They may open Kayak and compare 12 car rental companies, or they could be like me and go to their preferred company’s site where they have status and perks. Let’s consider the renter who shops price each time on online sites such as Orbitz, Expedia and Priceline. All three offer a loss waiver and additional coverage for the other parts of the trip.

Recently, I looked at three major sites and found I could buy loss damage coverage for about $40. That would cover up to $40,000 for a five-day rental and I could cover the rest of my trip costs, including airfare and hotel, for another $47. It would cost me about the same for LDW at the car rental counter.

There is one important condition — the covered items have to be paid for prior to the trip insurance to be issued. If car rental companies sell this product, they can get the car rental reservation paid at the time of booking. The more I looked the better it became.

I can purchase an annual travel policy for less than $500 a year. Since I travel at least 40 days domestically and usually 10 to 15 internationally, this is a good deal. The travel insurance industry has matured in the U.S. and there is a lot of competition for those dollars. Why not purchase from the car rental company you know and trust? Value for the frequent renter, branded by the company they go to often, will build more loyalty.

With a private-label product customized to the needs of the business traveler —including assistance services, lost document services, business property, medical, change fees and trip delay/cancellation — car rental becomes a modern travel provider.

Almost nothing about the car rental business is the same as it was when Jerry let George move his car across the street. Two things have not changed: customers do not have to pay with the reservation and car rental companies sell the same products the same way, and get the same results.

I wrote the first trip cancellation policy for Travelocity in 1999. I hardly understood the language of clicks and impressions, but we learned a lot about customers and online booking. Sadly, our trip options were buried somewhere on the site and no one knew how to purchase the coverage. After September 11, insurers were reluctant to be in the game. That has all changed. You can hardly purchase an airline ticket without opting out of trip cancellation. It is included unless you opt out.

A car rental company that steps up and recognizes the benefit to its customers will help the customer save money and time. They will offer something designed for the business traveler, keep it simple and retain marketing fees for the service they offer. The additional reward for the car rental company is a prepaid reservation, something we all want.

I just printed my annual travel policy — Yugos excluded.


  1. Alan Woodland [ February 7, 2014 @ 11:08AM ]

    Very though provoking article...As more and more people are getting out of privately-owned cars in favour of more flexible alternatives (e.g. carsharing) the question of what kind of insurance coverages are included (or available) from each vendor of mobility services becomes a big question for the consumer. The idea of an annual, non-owned auto liability insurance policy that would be transferrable between different rental companies and carshare companies is an idea whose time has come. The consumer chooses the level of coverage from the insurer once a year and has a choice beteeen multiple service providers and modes.

  2. Leslie Saunders [ February 10, 2014 @ 02:43PM ]

    Thanks, Alan for your inciteful comments. You get it!!

  3. Gerry Lynch [ March 7, 2014 @ 05:07AM ]

    Leslie - compelling argument. I've often wondered why this market for NNO type coverage hasn't taken off in the US. I've seen it sold in the UK and Europe at a nominal annual rate as well. Very thought provoking & great job!

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