As those stranded by the ash cloud return, Jeremy Gates looks at what’s in store for them when they try to claim compensation
AS MORE than 150,000 Britons stranded by the volcanic ash crisis finally return, many will be clutching a fistful of bills which pose a formidable challenge for travel insurers.
There are 165 travel insurance products in an industry worth £700m a year. However, no-one knows how many will pay for the mayhem created by the volcano if initial claims to airlines and tour operators are rebuffed.
Bob Atkinson, travel expert at Moneysupermarket.com, says: “The reaction of many insurers was extremely disappointing, with the majority not covering policyholders for flight cancellation – just advising them to contact their airline.
“I hope this is the wake-up call the industry needs to have comprehensive contingencies in place for such events.”
The Association of British Insurers (ABI) said member firms were unlikely to class the eruption as an “act of God” to avoid claims that the issue is awkward for airlines.
This is because airlines’ cover for “business interruption” usually applies when there has been physical damage to an aircraft or an airport – for which the risks are reasonably predictable and therefore insurable.
Weather events, such as snow storms or fog that close airports for limited periods, are not covered.
An ash cloud shutdown is probably not covered either.
Although Ryanair dropped a plan to limit compensation to the amount each passenger originally paid for their flight, there is scope for big arguments about bills for living costs and alternative transport which many have incurred.
While agreeing to pay “the reasonable receipted expenses of disrupted passengers”, Ryanair chief executive Michael O’Leary remains critical of EU regulations forcing airlines to pay when services are disrupted beyond their control.
Mr O’Leary says: “While competitor ferry, coach and train operators are obliged to reimburse passengers reasonable expenses, this reimbursement is limited to the ticket price paid to those operators.
“Yet airlines are required by regulation to meet potentially-unlimited expenses in circumstances where there has been a catastrophic closure of European airspace over the past seven days, as EU governments and regulators wrongly applied a blanket ban on flights over European airspace.”
To some extent, many travel insurers could be in the same bind as budget airlines: having slashed prices by taking more of their business online, they may lack resources to settle bills heading their way.
Mr Atkinson adds: “The knock-on effect of this situation could have ramifications in the future, as pressure on airlines mounts to pay millions in compensation to passengers. Anyone who has booked travel plans for later in the year may find they need to claim on their insurance, should their holiday plans end in disarray.”
While airlines are obliged by EU regulations to offer a full refund or a suitable transfer to another flight, and tour operators must bring customers back as best they can, bills for additional parts of lost holidays – including accommodation and car hire – will go to insurers.
Insurers can offer a “reasonable fee” for incurred costs, rather than the sky-high taxi and train fares seen in Europe this week.
Graeme Trudgill, at the British Insurance Brokers Association (BIBA), says: “Some companies indicate a willingness to help with all aspects of claims submitted – others say it isn’t covered at all.
“Some companies think it is in the spirit of their policies to see the events of the past week as ”adverse weather“ and will honour claims in various areas: costs of delay and cancellation, accommodation, irrecoverable loss of a deposit and compensation for costs of being stranded.”
HSBC, M&S Money and First Direct say they will pay for disrupted travel – provided clients have first contacted their airline or tour operator to see what assistance is available from them.
The decision means customers with policies from HSBC Premier and Advance, M&S Premium Club and firstdirectory are covered.
Chubb and Hiscox have also indicated a willingness to pay, but AXA is among those declining to do so.
Saga offers a maximum £215 for delays of outward flights – provided customers check in for flights in line with original booking conditions.
Saga spokesman Paul Green says: “If there are other associated costs that cannot be cancelled without charge, Saga customers should obtain a letter from the airline to confirm a flight was cancelled due to the weather and Saga will honour all claims of this nature.”
Mr Trudgill adds: “Insurers try to be as flexible as possible with each claim. When a flight is not operating, they may suggest using an alternative flight from the same region instead of making a claim.
“The vital thing is to use the emergency number detailed in your policy. To some extent, the industry is learning lessons which can help in future.”
However, Mr Trudgill thinks the Financial Ombudsman Service will decide many disputed insurance claims in the coming months.