NEGOTIATION

McGovern Associates successfully negotiated with the plan administrator of an elite luxury cruise line, to retain a larger portion of the collected insurance premium. This resulted in 20% additional travel insurance revenue.

The CFO of a luxury cruise line with gross travel receipts of $500,000,000 retired, leaving a void pertaining to the management of their Cruise Protection Plan. The cruise line engaged the services of McGovern Associates to bring the newly hired CFO up to speed with this product and to negotiate new terms for the upcoming policy period.

After a multiyear analysis of the premium collected and claims paid, an unusual trend became apparent. The premium generated remained relatively stable as claims fluctuated. With further analysis, McGovern determined this irregularity was attributed specifically to their World Cruise Program. While few clients booked the 89-day world cruise, the cost was eight times the average cruise price with predominantly older clientele.  This meant that trip cancellations in this category represented a much larger claim for the insurance company. It was uncovered that the insurance company had created a “built-in buffer” in the event there was an exceptionally bad year. Data revealed that the insurance company never used the buffer funds thus earning excessive profits during the previous three-year period.

McGovern successfully negotiated with the existing travel insurance administrator for a larger portion of the premium to be retained by the travel supplier. Terms for the new policy year included 5% of gross premium to be added to the cruise line’s existing upfront fee. With an $8 million program, this adjustment represented an additional 20% to their bottom line. To avoid future windfalls for the insurance company, a profit sharing agreement was structured to allow the cruise line to retain 75% of the excess funds after all claims were settled. Going forward, the cruise line has retained excess profits during good years and no longer forced to pay back any upfront fees during the years when claims are higher.