We are now developing the hotel protection product to an online travel agency, we want to insure the hotel reservation deposit if the insured cannot check in the hotel due to the covered reason, such as accident or severe injury to the insured, the bad weather or the terrorism, the new job offer or new job arrangement and etc.. And we want to charge the premium at the percentage (such as 5%) of the room rate. However, here is a risk that seems we have to consider.
That is the travel agency may use this protection to get benefit of the unsold rooms. For example, the room is normal $100 per night, the agency could mark the room price on its website at $250, if the agency cannot sell the room, the agency may authorize its one employee to purchase the room and the protection at $250+premium, then the employee files the claim with the covered reason, such as the new job arrangement, which the agency is easy to issue the letter and evidence. In this way, the agency seems could deal the unsold room easily, and even could benefit from this deal. Even we set any deductible, we still cannot avoid this risk. For example, in the above case, if we set 50% deductible, the agency still could benefit $25 after it.
So we are getting stuck here and affect our product development.
So is here any suggestions that we could avoid or mitigate this risk? Thank you.Jack
). The coverage would only be offered to those who had booked the room that far in advance. Then, I would limit the payment amount to the lowest-priced room sold by the hotel in the past 60 days or so. You would just put that in a "what we would pay" clause in the endorsement. If the cost was only 5% of the charged room rate, I still think they would buy it. If they had to cancel, they would be happy to get at least something back. The deductible seems high at 50%.