Airlines accused of getting "kickbacks" for travel insurance

Lawsuits claim the airlines don't disclose that they profit when travelers buy trip-cancellation coverage

© Reuters/ George Frey A passenger talks on her phone at a Delta Airlines gate a day before the annual Thanksgiving Day holiday at the Salt Lake City international airport, in Salt Lake City, Utah November 21, 2012. Picture taken November 21, 2012.

By Jonathan Berr, CBS News

Delta and JetBlue, two of the largest U.S. carriers, are facing separate class actions that accuse them of failing to disclose to consumers that they receive payments from sales of travel cancellation insurance promoted on their websites.

According to the nearly identical lawsuits, which were both filed earlier this month by Florida law firm Leon Cosgrove, the airlines leave consumers "with the false impression that the charge for trip insurance is a pass-through" fee from another entity with which they have no financial interest. Instead, the suits allege JetBlue and Delta receive "kickbacks" for selling policies on their websites.

"Consumers are required to make an insurance election, as they are unable to proceed with purchasing their airline tickets on [Delta and] JetBlue's website[s] until they choose whether to purchase a trip insurance policy," the JetBlue lawsuit says. "The consumer cannot simply ignore the insurance offering and move on to purchasing a ticket."

Delta and JetBlue note on their websites that the travel insurance coverage comes from AGA Service Co., the licensed producer and administrator of the plans, which are underwritten by Jefferson Insurance Co. or BCS Insurance Co. and are provided by Allianz Global Assistance. The carriers' sites use eye-catching colors to indicate they recommend that travelers buy the coverage.

"This marketing is intended to create the impression that the trip insurance is in the consumer's best interest -- while hiding the fact that JetBlue [and Delta are] pushing the product because it is in [their] financial interest to generate sales," the JetBlue suit says. "In other words, the consumer is deceived into believing that JetBlue [and Delta are] acting in the consumer's best financial interest, and not [their] own."

The suits claim that the payments to the carriers are illegal because the companies aren't providing anything in return. Moreover, since Delta and JetBlue lack licenses to sell insurance, they can't accept any payments relating to its sale, according to the lawsuits. American Airlines has settled key elements of a similar suit that was also filed by Leon Cosgrove, according to a company email to CBS News.

Officials from JetBlue and Allianz declined to comment. Atlanta-based Delta said the allegations are "false and have no basis in fact or reality." Leon Cosgrove couldn't be reached for comment.

The lawsuits jibe with a report issued earlier this year by U.S. Senator Edward Markey, D.-Massachusetts, that found the ticketing process at airlines and online travel agencies (OTAs) encourages travelers to buy travel insurance even though it's often bare-bones coverage loaded with exclusions.

Of the 16 companies Markey's staff evaluated, 15 required consumers hear a pitch for travel insurance before they made a purchase. He noted airlines and OTAs earn an "undisclosed fee on every policy sold." 

According to data Markey cited, U.S. travelers spent $2.6 billion on travel coverage in 2016, more than twice what they spent in 2004.


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Travel News: Airlines accused of getting "kickbacks" for travel insurance
Airlines accused of getting "kickbacks" for travel insurance
Lawsuits claim the airlines don't disclose that they profit when travelers buy trip-cancellation coverage
Travel News
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