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Commerce orders Virginia Surety Company to return over $88,000 to Minnesotans and pay civil penalties

Company allegedly violated regulations prohibiting “opt-out” travel insurance through “Cheap Caribbean”

February 19, 2013

For Immediate Release:

SAINT PAUL, MN – The Minnesota Department of Commerce announced today that Minnesota consumers may qualify for a refund if they purchased travel insurance from Virginia Surety Company (VSC), or one of its contracted agencies, between January 1, 2007 and October 31, 2012.  The announcement came after the Minnesota Department of Commerce and the Missouri Department of Insurance issued a joint consent order alleging that VSC routinely required consumers to affirmatively “opt-out” of purchasing premium travel insurance packages, violating numerous state laws and regulations.  

“The Commerce Department just stopped one more company that utilizes misleading gimmicks to sell unwanted products, scamming countless Minnesota consumers,” said Commerce Commissioner Mike Rothman.  “Minnesotans deserve a marketplace that rewards low prices, as well as top quality products and we are here to ensure consumers are protected from marketing tricks that unknowingly pad the bottom line in violation of consumer protection laws.” 

While VCS was licensed to sell insurance in Minnesota, Commerce’s investigation revealed a number of contract companies that received sales commissions from VCS were not licensed at the time to do business in the state. This included the travel company Cheap Caribbean, which operated a website automatically enrolling and requiring consumers to affirmatively “opt-out” of travel insurance.  Cheap Caribbean’s website utilizes a multi-step process that takes consumers through options to book airline tickets, hotel rooms, and other forms of transportation.  One of the final steps in Cheap Caribbean’s process attempted to sell optional travel insurance coverage.  Consumers were not given the option to skip this step, however, and through the website design consumers who clicked to bypass the step inadvertently purchased the premium insurance package.  Commerce’s investigation alleges that Cheap Caribbean required consumers to search out and actively request that they wished to receive the standard insurance package or no insurance coverage at all.  During the purchase process, Cheap Caribbean’s site displayed a cost breakdown on the right side of the screen.  Yet, up until the final check out page, the line designated for insurance costs were listed as ‘none’.

In addition to the “opt-out” violation, the Commerce Department’s investigation determined that VSC reported significantly lower premiums to Minnesota and Missouri than were actually collected.  VSC allegedly only reported the net premiums of the companies it contracted with, not the entire amount paid by consumers.  This allowed VSC to report lower premium taxes and cloak the much higher amounts consumers were actually paying for coverage.  

Under the consent order, VSC agreed to return $88,000 to Minnesotans, to cease its underwriting of travel insurance products in Minnesota and Missouri, and to pay back the State of Minnesota for back taxes and licensing fees, as well as a $100,000 civil penalty.  

Additionally, VSC has been ordered to issue full refunds to any Minnesota or Missouri consumers who purchased insurance from “Cheap Caribbean” between January 1, 2007 and October 31, 2012.  VSC will be making efforts to reach consumers it believes were affected by the “opt-out” travel insurance.  If you believe you qualify for a refund, or if you have any questions, please contact the Department of Commerce Consumer Response team at 651-296-2488 or 1-800-657-3602.