*Originally published in Lex Legal.

*This is an AI-powered machine translation of the original text in Portugues

At the moment of purchasing an airline ticket or a travel package, travel insurance is often presented as an additional item during checkout, accompanied by persistent solicitation through successive pop-ups on the websites of travel agencies or airlines, posing provocative questions such as: “Are you sure you want to travel unprotected?”

Embedded in this persuasive rhetoric is the price of the insurance, presented as insignificant relative to the total cost of the travel package or airline ticket. Paying, for example, BRL 80.00 for travel insurance on a travel package costing more than BRL 2,000.00 does not, from the traveler’s perspective, appear at first glance to represent a substantial increase in expenses. Consumers typically neither question nor examine what that insurance actually includes beyond the obvious minimum expectation—medical expenses and related coverage.

This vulnerability in consumers’ critical decision-making is described in the literature as the magnitude compression bias. Because the relative price is small in comparison with the total amount, the incremental cost is rarely scrutinized. For example, we are often willing to walk an extra block to save BRL 20.00 on an item that costs BRL 100.00.

However, we do not react the same way when that same BRL 20.00 increase occurs in a purchase worth BRL 2,000.00. This bias is heavily exploited by travel insurance distributors, whether to inflate prices excessively or to conceal such exploitation through misleading practices and non-transparent presentations of the product.

An investigation conducted as part of a recent study by the Legal Wings Institute, in addition to conceptually presenting the problem, analyzed travel insurance certificates and vouchers marketed by distributors on digital platforms—that is, companies that distribute insurers’ products in the marketplace.

The study revealed that, in a large portion of the products analyzed, the premium intended to compensate the insurance company represented only between 10% and 30% of the total amount paid by the consumer.

In other words, in a travel insurance policy costing BRL 80.00, depending on the distributor, only BRL 8.00 may actually be allocated to the payment of the insurance premium to the insurer—a sum that already covers medical, hospital, and dental expenses, which constitute the core insurance product and the primary reason consumers purchase the coverage in the first place. The remaining BRL 72.00 serves to compensate intermediaries, namely distributors and travel agencies.

Consequently, between 70% and 90% of the amount paid by consumers is allocated to a variety of “assistance services,” including ancillary features such as concierge services, access to airport VIP lounges, international e-SIM services, and baggage tracking. In some cases, even medical and hospital expenses themselves appear listed in a non-transparent manner among these “auxiliary services,” creating a harmful form of bis in idem that can mislead even the most cautious consumers.

All of these services are offered to consumers on a compulsory basis, either because of a lack of transparency or because no meaningful alternative is provided: consumers must either purchase the entire package or, to repeat the persuasive question posed by these providers, “travel unprotected.”

This model stems from a regulatory arrangement that expanded the powers of insurance distributors without creating proportional oversight mechanisms, thereby generating incentives for competition within the sector to shift away from the traditional price-quality axis and toward the remuneration of distribution channels.

What emerges is competition not over product quality, but over commissions paid to intermediaries. Travel agencies and airlines are incentivized not to offer the best insurance product available among competing insurers, but rather to favor the distributor that pays the highest commission. Ultimately, consumers unknowingly pay for commissions and ancillary assistance services whose value far exceeds the actual cost of the underlying insurance coverage.

From the perspective of Brazil’s Consumer Protection Code (CDC), this situation constitutes at least three distinct violations. The first is tying or bundled selling. Consumers are effectively compelled to purchase the entire package of assistance services as a condition for obtaining the insurance coverage they actually seek. This practice violates Article 39(I) of the CDC, which expressly prohibits conditioning the supply of one product upon the acquisition of another.

The material impossibility of unbundling the components of the offer is, in itself, an abusive practice. It is worth noting that in other sectors, such as life insurance, consumers are often able to select which assistance services they wish to purchase alongside the insurance policy, tailoring both the product and its price to their specific needs.

The second violation concerns lack of transparency and misleading advertising by omission. The CDC guarantees consumers the right to adequate and clear information regarding what they are purchasing and how much they are paying for each component. In practice, however, travel insurance vouchers generally fail to clearly distinguish the insurance premium from ancillary services, do not clearly indicate that the premium itself already covers medical expenses, and do not disclose in the final price what portion corresponds to contracted services and what portion represents commissions paid to intermediaries.

There is also a discrepancy between what is presented on the purchase screen and what appears in the document delivered after the purchase. The latter often omits assistance services that had previously been highlighted to persuade consumers to buy the product, strongly suggesting that such services are included merely to disguise commissions. In several cases, services listed in the pre-contractual offer simply disappear from the final insurance certificate. Article 37(3) of the CDC prohibits misleading advertising by omission, characterizing as unlawful the failure to disclose information essential to the contract.

The third violation is bis in idem, that is, charging twice for the same benefit. Regulatory rules require international travel insurance policies to include medical-expense coverage as a mandatory component. Consumers already pay, through the insurance premium, for the right to reimbursement of healthcare expenses incurred during travel. When a distributor additionally charges for “medical assistance” or “telemedicine” services that effectively duplicate the same coverage, consumers are charged twice for the same benefit without having any realistic ability to perceive the overlap.

Resolution No. 315/2014 of the National Council of Private Insurance (CNSP), which specifically regulated travel insurance until 2022, expressly prohibited this practice. The current regulation did not reproduce the prohibition with the same degree of clarity, and travel insurance distributors have taken advantage of this regulatory ambiguity to increase their revenues. In doing so, however, they have overlooked the fact that they remain strictly prohibited from exploiting consumers—if not under sector-specific regulation, then certainly under consumer protection law.

Brazil’s domestic tourism sector generated BRL 22.8 billion in 2024, representing growth of 11.7% compared to the previous year, with 20.6 million trips undertaken. Brazilian demand for airline tickets, travel packages, and accommodations reached its highest level in the last four years. This rapidly expanding market is precisely the one that currently enjoys the least regulatory protection and presents the greatest risks to consumers.

If the largest share of value within this chain is transferred from consumers to intermediaries, rather than to the insurer—the entity that actually provides the insurance service and bears the risk before the regulator through adequate reserves and reinsurance arrangements—the sector becomes vulnerable to systemic collapse. It is worth remembering that traveler protection was transformed into an insurance product by regulation precisely to shield consumers from such a potential collapse.

The problem is that these sophisticated intermediary practices deprive consumers of any meaningful ability to compare the relative prices of insurance premiums and choose the insurer that best meets their needs. In reality, consumers lose sight of the insurer altogether and become captive to distributors and travel agencies. These intermediaries not only possess incentives, created by flaws in sector-specific regulation, to engage in abusive conduct, but, faced with vulnerable and effectively captive consumers, they have done so with remarkable sophistication and efficiency.