Could the travel insurance industry do better?

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Total views: 179 | Word Count: 541 | Date: Fri, 28 May 2010 | 112 comments

Steve Williams, head of travel insurance at Confused.com, offers up his thoughts on the volcanic ash chaos: Over the last week I can definitely say I've seen my fair share of news and commentary about the volcanic ash spewing out from Iceland. Now, as flights have begun to take off again, I'm reflecting on the issues this unprecedented event has thrown up, and how the situation has been handled.

Since the volcano erupted, airlines have been claiming they are losing millions of pounds every day, and, whilst I sympathise with them, they have a legal obligation to their booked passengers, and should have a contingency plan in place for instances like this.

At the same time, the travel insurance industry could also have taken a uniform approach to dealing with the travel chaos, but at present, this is not the case. It's at times like this that people expect their travel insurance policies to provide for them, but it seems some people will be disappointed. Travel insurers are adopting differering approaches to what they will cover in relation to volcanic ash claims.

If you want to know what our travel insurance providers are saying about what is covered and what isn't, you can see all responses we received from our partners on our Editor's Blog. In the meantime, you might be thinking; ‘I buy travel insurance to cover me for things like this, so how can insurers say I'm not covered? Well, part of me thinks the same thing. But, insurance providers are describing this incident as an "Act of God". This technically means an event outside of human control and hence gives them a legal basis to decline claims as a volcano, it can be argued, fits this definition. If you ask me, it's a pretty poor argument which may cause people to lose faith in insurers and make them question the point of having a travel insurance policy at all.

The Aftermath Of The Volcanic Ash Chaos: So what now? Insurers will likely spend months wading through claims against the chaos and this may have a negative knock-on-effect to the detriment of consumers. What I mean by this is that, potentially, a large wave of claims will be paid by insurers. But, should this happen, my prediction is that the cost of travel insurance will rise to cover the losses they will suffer.

This is bad news for customers, but perhaps some good could still come out of it. With all the negative headlines about insurers using the "Act of God" clause to avoid paying claims, maybe they will see this as an opportunity to offer policies that cover for every eventuality. But if this is something we, as consumers, want, we should also be prepared to pay more for it.

About the Author

Sarah Maple writes for Confused.com who offer everything around insurance and savings.

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