Then it's a pretty low thing to do to openly post it here, if it were meant for all of us to read he wouldn't have emailed it...

It seems you have some personal problem here, you attacked him about the Freddies as well, and after he posted clear and honest explanations you were one of the only ones not to offer an apology.

Perhaps it's time to go back to your fastest growing travel resource web site on the Internet.

Just my �0.02

Tino,

Shock shock horror horror: it's very likely that your insurance company also doesn't really "stand behind" its guarantees, but has another insurance company (a re-insurer) take on the risk. This seems to me to be the same thing, and not cause for concern.

5 days later the cheap accusations thrown at Randy are still there, with no sign of an apology for the earlier, unfounded ones.

I guess it's hard to keep up with things at ITYT, since my post 2 members have signed up, and 42 posts have been made.

42 / 5 = 8.4 posts/day.

That includes your posts dbaker, which account for 38% of all posts on ITYT. I guess as long as you post often enough ITYT can remain the fastest growing travel resource web site on the Internet.

[This message has been edited by SMessier (edited 05-13-2002).]

I think that attacking DBaker is not needed and adds nothing, regardless of what you may think of him or his site.. Same goes for personal attacks on Randy.

The original question posed is still valid though. And I don't think the statements equating this to a "regular" insurance co. makes sense. It isn't. Insurance regulations are there for consumer protection, and this isn't an insurnace co., so they don't have to prove any sort of capitalization, etc.



[This message has been edited by BoSoxFan45 (edited 05-14-2002).]

BSF - PF transfers 100% of its risk to a real, registered (re)insurance company (unlike real insurance companies, which transfer only some of their risk). Therefore, PF bears no risk -- it is in effect a reseller of insurance policies. You could be scammed only if 1) the real insurance company involved turns out to be a scam or 2) it turns out that Randy has been pocketing all the money, and isn't really reinsured by anyone.

Both contingencies seem extremely unlikely to me.

That said, I am not a customer of PF because I think the premiums are an order of magnitude larger than what the coverage is worth to me -- however, if Randy can get away with charging such high premiums, then I have even more respect for his business acumen.

Agreed, presuming all the i's are dotted and t's are crossed, more power to him and the company.

If it is as you state, doesn't that then make this program insurance- or at least make priviegeflyer an insurance agent? I'm only familiar with the laws governing insurance co's in a few states, but I know I went through hoops to get a "no action" letter from the attorney general or commerce commissioner of a few states once they concluded that we were not insurance. I did this before engaging in business in such states, lest the hand of the law be smacked down upon me.

I agree that the "economic reality" of the situation does make PF something like an insurance agent or reseller. I don't know how Randy got around this; maybe he set up the company in a state with relatively lax insurance laws, or found some other way to avoid being recognized as an insurance company.

The point, however, is not PF's legal situation, but whether the policies it sells are sound. I think that the answer to this question is yes. Again: In the event of ff program default/failure, PF's reinsurer, not PF, will be writing the checks.

So... I think we can agree that PF might (might!) be operating in somewhat muddy legal waters, as far as its lack of registration as an insurance company, but that its ability to pay out is fundamentally sound, and has nothing to do with Randy's/PF's cash reserves.

If PF were run by a fly by night operation none of us knew, then I'd agree that the lack of insurance registration would be cause for concern. But I think Randy values his relationship with the vff community too much to bilk them on this.

Wow dbaker you really have a hide to be posting what you have here. I went and had a look at "ITYT, which is the fastest growing travel community on the Internet" as I am always open to new ideas and concepts. The only airline I presently have any deep knowledge of is UA, so went to visit your UA forum and if you are indeed the fastest growing board based on that link, the guys in last place must be quite something! Less than 1 post a MONTH average since October from other than you is hardly Grand Central Station.

Back to the topic thread - I think the "insurance" is only paid by the PrivilegeFlyer company if an airline plan goes TOTALLY out of business right? When was the last time that happened with a MAJOR carrier plan? Chapter 11 does not get a payout, nor an amalgamation or a plan takeover by another airline - correct? So right there the scheme looks pretty much bullet-proof based on a long industry history of much financial trouble, but few total collapses of a major flyer scheme. Which is all most of us want to protect against - correct?

And I recall you get to redeem basic flight awards equivalent to what were already booked or in your account, but not upgrades? They could be booked by Randy's people on Southwest or Jet Blue etc if needs be, as long as they get you there and back within 24 hours of original flights. And of all the folks who insure, the number of plans would be widely spread among them, so if US Air went bust tomorrow and no-one picked up Dividend Miles (highly unlikely) it would still only represent a VERY small % of all folks registered. I am sure they have had an actuary look at the figures, and a risk cap of $7,500 (*retail*) for $119 p.a. premium looks pretty solid on first glance to me. (But note I am in no way in that line of business, and that is an opinion only.) A very large number of folks would have rushed into this in Sept/2001 so that money has not been paid out by one cent - agreed?? My house and contents insurance policy cost versus sum insured is geared literally 10 times higher than this math, and the exposure/risk is actually higher I suspect. On that basis even self-insuring here would NOT be too risky an option IMO.

And what is not apparent until you read the schemes covered is that it ALSO covers your points in all the major hotel plans and even schemes like Amex Membership Rewards and Diners Club. I would have close on a million points in Starwood/Hilton/MR alone. But Starwood/Hyatt/Ramada/Marriott etc are not going to go out of business are they?? Hmmm, well isn't that what they thought about Enron?

For $119 it is cheap peace of mind IMO.

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~ Glen ~ (edited for HTML)



[This message has been edited by ozstamps (edited 05-15-2002).]

I've been thinking about this insurance kind of thing and I think it's probably completely covered.

Look at it this way: you pay $120 a year. Suppose AA stock is $100 a share. If I bought an option that allows me to sell AA stock 1 year from now for $5 it would cost me very little money since the stock is so high in comparision. For $100, I can probably buy options to let me buy 2000 shares at this price.

Now AA goes bust. My 2000 options turn into $10,000 so I get $2,500 and you get $7,500 (max). So we both win.

If AA doesn't go bust, my 2000 options are worthless but I still have $20 of your money so I still win.

If AA goes "almost" bust, my 2000 options are worth $10,000 and you get nothing so I really win!

This is the basic premise of insurance companies. Just buy something else and you are guaranteed not to lose.

I think the point of contention for many people is the probability of collecting the $7,500 if AA goes bust. PF is insured - "insured" could mean they have an underwriter, or it could mean they have a liability policy (or some other type of insurance). One type gives me a good feeling about being able to collect, the other doesn't. Only Randy knows.

Mellody's Mail: Fly Right, Protect Your Miles
http://abcnews.go.com/sections/busin...il_020606.html

The rest of the answer EPS provided a link to (which doesn't seem to work these days, at least for me):

[This message has been edited by SMessier (edited 06-10-2002).]