Beware of technology

ITIJ 198, July 2017
When the IT system that guides British Airways flights around the world crashed at the end of May, it meant tens of thousands of passengers’ flights were delayed or cancelled. BA said that a loss of power to a UK data centre was made worse by the fact that a subsequent power surge blew its IT systems. However, a leaked email to the Press Association has suggested that while undergoing maintenance, the power to the IT system was accidentally switched off, and when switched back on, it was done ‘in an unplanned and uncontrolled fashion, which created physical damage to the systems’. Whatever actually happened, and whoever was responsible, the effect on passengers was undeniable – hours spent in airports waiting for flights that never took off, and long delays resulting in cancelled hotel bookings, missed flight connections and ruined trips.
under EU flight compensation rules … the airline has primary responsibility for the welfare of their customers if they are delayed or have had their flight cancelled 
So, what were all these passengers supposed to do? When the delays and cancellations first occurred, customers who had been affected were urged to claim for compensation on BA’s website. According to Malcolm Tarling of the Association of British Insurers (ABI), one of his colleagues did just that, and during the process was asked whether or not he had travel insurance. Once the box had been ticked to say that he did indeed have cover, then a subsequent box popped up that urged him to take up his claim with his insurer in the first instance. Under European Union (EU) flight compensation rules, though, an airline has primary responsibility for the welfare of its customers if they are delayed or have had their flight cancelled. 
Putting it right
The Association of British Insurers was quick to say that BA shouldn’t be pointing its customers straight towards their insurers, and it is only in the event that the airline refuses to pay a claim that an insurer should be contacted. Tarling gave ITIJ a breakdown of how events unfolded following this statement. 
“First of all,” he was keen to emphasise, “the ABI were not out to pick a fight with BA!” When the ABI became aware of BA’s advice, the BA communications team were contacted and they apparently agreed to amend the information being given to customers. Presumably due to the fact that they were run off their feet, this did not occur. Around 24 hours later, a journalist for the Financial Times came up against the same advice on BA’s website, and called the ABI to ask if the information was correct – the ABI assured her that it was not.
travel insurance is designed to cover specified events, such as unexpected illness or medical treatment … the unique problem experienced by British Airways is classed as an exceptional event
Cue a front-page story on the Financial Times, and then coverage by ITV and other news outlets. Shortly afterwards, BA revised the wording of the statement on its website and removed all reference to insurance from its statement regarding customers affected by the IT failure. The airline’s website subsequently read: “We will fully comply with all of the relevant EU compensation regulations regarding any cancelled or substantially delayed services and for associated welfare claims (e.g. hotel accommodation, transport to and from your hotel, meals, and telephone costs, while you were delayed).”
Tarling told ITIJ that all the ABI wanted to do was ensure that customers – who had already had a rough time of it with delays and cancellations – weren’t being passed from pillar to post. Anyone who did follow BA’s erroneous advice to contact their insurer would have been passed back to the airline almost immediately. Any policies that do cover travel delay would always have a condition that states the customer must first approach their airline or tour operator for compensation, and only in the event that their claim is unsuccessful would a travel insurer then take the claim.“This isn’t about travel insurers dodging their responsibilities,” said Tarling, “it’s about giving customers the right advice at the right time. Travel insurers with travel delay benefits in their policies who have customers with declined claims from BA will accept their responsibilities and deal with claims as necessary.”
Consequential loss of holiday extras, such as non-refundable hotel stays, car hire, sightseeing trips and so on, are not 

covered by an airline under EU law, so this is where travel insurers may well see some claims come in. Not every policy offers cover for this kind of loss, however; it tends to only be the more comprehensive policies that are naturally more costly. Stephen Howard, head of product at tifgroup, said: “The recent BA computer crisis has once again highlighted the problems of travellers who are affected by these unusual situations and find that they are unable to claim on their travel insurance policies for their additional indirect costs, such as accommodation, excursions and car hire.”
According to MoneySavingExpert, a consumer website in the UK, Allianz policies won’t cover consequential loss, and nor will Coverwise or Leisure Guard. HolidaySafe customers will have to check their policies – some will be covered, but only if they had checked in and been delayed for more than 24 hours. LV= customers with Premier Policies will be covered, and for Aviva customers, the company’s standard travel insurance policy covers unused personal travel and accommodation costs where a customer abandons their trip as a result of their flight being delayed for more than 24 hours. As well as flights and hotels, unused costs might also include car hire, excursions, kennel, cattery or professional pet sitting fees.
any policies that do cover travel delay would always have a condition that states the customer must first approach their airline or tour operator for com
Jason Harris, senior claims manager at Aviva, said: “Travel insurance is designed to cover specified events, such as unexpected illness or medical treatment. This is fundamental to how insurers understand the risk of an event happening and therefore helps them to charge an appropriate price for the cover. The unique problem experienced by British Airways is classed as an exceptional event but, generally, flights being delayed for over 24 hours is something that does happen – albeit relatively rarely. Our expertise and experience means this is something for which we feel we can accurately gauge the risk and price accordingly. We also feel that being delayed for a whole day is an understandable reason for customers to abandon their vacation – being sat at an airport for 24 hours is a pretty miserable start to a holiday.”
It’s fair to say that coverage for consequential loss is patchy. ITIJ asked Stephen Howard why. “Firstly,” he said, “EU Regulation 261/2004 clearly lays the responsibility for refunding customers, or providing additional compensation to customers, with the airline and/or the tour operator. The Package Travel Regulations also apply for tour operators. Insurers rightly feel that this should be the customer’s first port of call, and that insurers should then look to provide reimbursement of costs that cannot be recovered from anywhere else.” 
Tom Bishop, head of travel insurance at Direct Line Group, agreed: “Where something like the BA IT failure occurs, BA are responsible for providing support, compensation or alternative travel arrangements. Our travel policies do not cover any recoverable expenses or costs that are covered elsewhere (other insurance cover or cover with bodies such as ABTA/ATOL).” He went on to say that: “We don’t cover any form of indirect loss; however, we do cover consequential loss. For example, we do normally cover travel delay and costs such as accommodation and travel or parking charges as a result of abandoning the trip due to being delayed for more than the number of hours stated in the policy wording.”
Changing demand
Howard said that policies have had to change to keep in line with what regulators have suggested would provide more clarity to customers. Travel policies, Howard explained, used to provide cancellation cover for ‘any cause outside of the reasonable control of the insured person’. However, regulators have suggested that this was too general a term and open to different interpretations. “Therefore,” he told ITIJ, “travel insurers amended their policy wordings so that they would only cover cancellation due to ‘specified causes’ (i.e. death, injury or illness of the insured person or a close relative and so on, fire or burglary at the insured’s home prior to departure, redundancy). The majority of today’s wordings, therefore, do not cover cancellation of a flight by an airline, or cancellation of a holiday by the tour operator. Nor do they cover cancellation of a holiday because of ash cloud, terrorist attack, or even the death of a pet (although some policies have added death of pet as a specified cause).”
Tom Bishop concluded: “Travel insurance is designed, primarily, to cover medical expenses and medically necessary cancellation/curtailment. Over time, extra benefits have been added and it is a product that continues to evolve based on both what customers actually do with their trip bookings. Whether an insurer covers consequential loss is very much down to the risk appetite of the insurer.