“I realized that there was no way that we could continue to pay claims”

We’ve already heard from Prime Travel Protection’s customers and from the agents who sold its policies. But other than a form letter from its trustee, the company and its president, Jerry Watson, have remained silent. Until now.

To recap, state authorities in Florida and Colorado are investigating Watson’s company and travel agents who sold Prime Travel Protection policies.

Agents say they were unaware that Watson’s travel protection was unlicensed insurance, and insist that they stopped offering it the moment they found out it was an illegal product. But some customers claim Prime Travel Protection is the latest incarnation of a sophisticated insurance scam, and they believe Watson will return with the same network of travel agents, whose loyalty they say he buys with generous commissions and signing bonuses.

Last week, I asked Watson for his side of the story. Here’s the full text of our e-mail interview:

Q: Why was it necessary to cease operations? Have you filed for bankruptcy protection, and if so, in which court?

Watson: I ceased operations when I realized that there was no way that we could continue to pay claims based on the incoming revenues. I had not received any cease-and-desist notices. I elected not to file bankruptcy mainly because it is and has always been my intent to make good on the obligations of the company. Liquidation seems to be a better alternative.

Q: How many claims did you pay in 2008? How much money was paid to your policyholders in total?

Watson: I don’t have the exact number of claims but the dollar amount paid in 2008 is approximately $1,236,691. The total dollar amount for all companies from 2004 through 2008 is approximately $5,627,222.

Q: How many outstanding claims do you currently have? What is the amount of the claims? Of those, how many are approved, and how much are they worth?

Watson: No answer.

Q: Did you ever represent any of the policies offered through Prime Travel Protection and Travel Protection Services to agents as insurance, or encourage agents to represent your policies to their customers as insurance?

Watson: NO, I/WE never advised the travel agencies or the customer that we were an insurance company. We stated that we offered a benefit services contract.

Q:: How is Prime Travel Protection different from travel insurance?

Watson: The Prime Travel Protection service contract is issued in exchange for a separately stated consideration, whereby we are obligated for a specified period to the holder to repair, replace or indemnify or reimburse the holder the cost of repairing, replacing or provision for incidental payments of indemnity. Prime Travel Protection is a member of CLIA (Cruise Lines International Association) and ASTA (American Society of Travel Agents.

The business plan of Prime Travel Protection is to provide benefits that have been deleted from other companies, including “Vendor Default” and pricing that is Non-Age based. Prime Travel Protection offers participating agencies the ability to receive commissions on sales and referrals or to establish their own pricing grids.

Prime Travel Protection is underwritten by the Cielo Capital Insurance Company Ltd; certificate number S24794 with assets exceeding $1,000,000.00 and its Reinsures.

As a comparison with other providers, our claim denial percent ratio was well within Industry standards.

Q: How many travel agencies were selling your policies at the time you ceased operations?

Watson: 38

Q: Do you have any plans to leave Colorado or to start another company that offers travel protection?

Watson: I have no plans to leave Colorado and I do not have any intentions of operating any type of travel protection company.

Update (9 p.m.): Watson has followed up with more information.

I wasn’t able to provide you with accurate data with reference to the number of claims and amounts due to the number of chargeback’s and agency participation in claims settlements.

Regardless of the outcome of the state investigations, I believe that I have tried to accommodate the consumer and the agency community the best that I can. However, the individuals that have responded to your blog are those that have been denied their request for reimbursement and I expect nothing more than their comments, etc. Unfortunately, the customers that have received the benefits of their contracts most likely will not respond in a complimentary fashion and they are in the majority. Our denial rate is less than 20%, which is well within the Industry averages.

For those consumers that feel that they have been denied the benefits of the contract purchased, per the Terms and Conditions of their contract, they have the opportunity to submit to binding arbitration with the American Arbitration Association for a hearing on their case. To my knowledge, their have been no cases filed with the American Arbitration Association. Their failure or lack of evidence to proceed with this form of resolution only validates their claim denial.

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