ITIJ 196, May 2017
The latest security measures affecting travellers to the US and Britain have forced some insurers to rethink their policies covering valuables carried in hold luggage. Robin Gauldie reports
In March, the US Department of Homeland Security barred travellers on some airlines flying into the US from eight countries from carrying electronic items larger than smartphones in cabin baggage. Such items – including laptop and notebook computers, tablet devices and game consoles – may now be carried only in checked baggage.
“Evaluated intelligence indicates that terrorist groups continue to target commercial aviation and are aggressively pursuing innovative methods to undertake their attacks, to include smuggling explosive devices in various consumer items,’’ the Department said in a statement. The rationale behind the ban appears to be a concern that even a relatively small explosive device concealed in a laptop or tablet would cause catastrophic damage if detonated in the pressurised passenger section of an aircraft. A similar explosion in the hold section might be less destructive.
the ban is here to stay, in common with other airline security measures like the ban on carrying liquids on board
The measure affects direct flights to the US operated by non-US airlines from Amman, Cairo, Istanbul, Jeddah, Riyadh, Kuwait, Casablanca, Doha, Dubai and Abu Dhabi. US carriers are exempt. The UK has already introduced similar restrictions, and has said the action is not based on identification of a specific terrorist plot, but stems from growing concerns about the continuing threat from Middle East-based terrorist groups. That seems to indicate that the ban is here to stay, in common with other airline security measures like the ban on carrying liquids on board. When introduced in 2006, that was supposed to be a temporary measure, but it is still in place worldwide.
The UK devices ban is open-ended, but the US restrictions will be reviewed by the end of 2017. The US has not excluded the possibility of adding more routes to its list. However, no other countries have so far shown any appetite for introducing similar restrictions. The Netherlands and Italy have both stated they see no need to introduce such measures. Germany, Ireland and Switzerland have ruled them out, and the European Commission said it was not aware of plans by any member state to introduce a ban.
A considered act?
As a result of the actions by the two governments, travel insurers are likely to see an increase in claims for stolen, lost or damaged items carried in hold baggage, say industry sources. “Theft will increase and fraudulent claims will escalate,” cautioned Kate Huet, managing director of International Travel and Healthcare, a British insurance provider. “It’s a poorly thought through measure.”
Theft will increase and fraudulent claims will escalate
Shashank Joshi, senior research fellow at security think tank the Royal United Services Institute, said: “This risks being seen as a form of pointless ‘security theatre’ which causes great disruption with little benefit to aviation security.”
“The travel restriction is not based on a credible, specific threat of an imminent attack,” said Barbara Chin of US law firm Mintz Levin. “Instead, it reflects a new consensus among US intelligence agencies that terrorist groups are now smuggling explosive devices hidden in electronic devices such as laptops. Counter-terrorism experts are equally divided over the need and effectiveness of the new travel restriction.”
That lack of unanimity did not deter the UK from following the US’s lead. Instead, the Government went even further, extending the ban to all British and foreign carriers operating direct flights to the UK from any airport in Turkey, Egypt, Tunisia, Jordan, Lebanon and Saudi Arabia. While the US appears to consider Casablanca, Doha, Dubai and Abu Dhabi as high-risk departure points, Morocco, Qatar and the UAE are not included in the British ban. The UK’s specification of which items must be checked in is also more precise, and more generous, than that of the US restriction, permitting passengers to carry devices no larger than 16cm long, 9.3cm wide and 1.5cm in depth, compared with Homeland Security’s vague ‘no larger than a cellphone’ definition.
The smallest smartphone on the market is not much bigger than a credit card, while the average phone is around 11cm by 6cm.
Saudi Arabia ranks among the world’s least popular destinations for British and US travellers. Jordan and Lebanon are not mass tourism destinations. The number of Britons holidaying in Tunisia plummeted from 425,000 in 2014 to 24,000 last year after the killing of British tourists at Sousse in 2015 and a UK Foreign and Commonwealth Office warning against all but essential travel, which remains in force until at least May 2017.
insurers already take a flexible approach to claims where passengers have been forced to place items in hold baggage
The number of US insureds travelling to and from the affected countries on non-US airlines is relatively small, and US insurers appear unconcerned by the actions, said Megan Freedman, executive director of the US Travel Insurance Association. “Anecdotally, members have not seen an impact from the ban in its current state; if the restrictions were to stay in place or become more widespread, companies would take the time to evaluate the impact and possibly make changes,” she said.
However, Turkey and Egypt remain popular tourism destinations for Britons, and British airlines affected by the new restrictions – such as easyJet, Jet2, Monarch, Thomas Cook and Thomson – carry large numbers of holidaymakers to and from their airports. Both countries have seen visitor numbers from the UK tumble in the last two years, but 1.7 million Britons visited Turkey last year and around 900,000 visited Egypt, so British insurers have more cause for concern than their US counterparts.
To cover or not to cover?
Reports in mainstream media quoted a warning by ABTA, the UK travel trade association, that ‘these devices are typically not covered by travel insurance policies either for loss, damage or theft when placed in the hold’ – this move by ABTA prompted several British insurers to clarify that they will, at least for the time being, waive some exclusions and honour claims.
British secretary of state for transport Chris Grayling appealed to the insurance industry to ‘be realistic’ about the restrictions by extending cover to include electronic items carried in hold baggage, while Mark Shepherd, head of property, commercial and specialist lines at the Association of British Insurers, said some insurers already take a flexible approach to claims where passengers have been forced to place items in hold baggage due to circumstances beyond their control.
all such claims must be supported by a property irregularity report from the airline
Shepherd also said some travellers may be covered under their household contents policy and suggested they could seek compensation from their airline for damaged devices. That raises the issue of squabbles between travel insurers, contents insurers and airlines over who pays out on such claims. Airlines are notoriously reluctant to pay compensation, and in any case their responsibility for lost or damaged luggage is limited by the Montreal Convention to €1,131.
“Gadget insurance is best placed to counter this ban, by increasing their terms of insurance to cover previous exclusions, so that damage/theft from electronic devices in hold luggage is covered,” noted Kate Huet, adding: “This is already available. Taurus Insurance Services, which provides travel gadget cover in partnership with many UK travel insurers, has decided to extend cover to include items that are placed in the hold of aircraft, for all flights affected by this ban.” Taurus provides gadget cover of up to £3,000 per person when travelling abroad, but it won’t take much to breach this when you consider the number of expensive electronic items people are now routinely taking away with them.
Other insurers, while acting to reassure clients that they would honour claims, have generally extended even less generous levels of cover. Saga Travel Insurance, for example, limits cover to £600 per item – not enough to cover the replacement cost of a high-specification notebook, tablet or laptop.
“Valuables – including electronic devices – carried in suitcases, trunks or similar containers are typically excluded from travel insurance cover unless they are on the customer’s person all the time,” said Allianz Global Assistance UK in a statement. However, the company then confirmed that it will cover claims made because of loss of, or damage to, electronic devices checked in with hold baggage by passengers flying to the UK from Turkey, Lebanon, Jordan, Egypt, Tunisia and Saudi Arabia.
Already alert to the potential for fraudulent claims, insurers have emphasised that all such claims must be supported by a property irregularity report from the airline and have urged insureds to make themselves aware of policy limits and exclusions.
“As well as taking the time to thoroughly understand the terms and limits of the policy ahead of their departure, UK customers travelling to and from the countries affected should check the cover provided by their household and gadget insurers, as this may already provide cover,” said Barry Smith, Allianz Global Assistance Underwriting Manager, UK and Ireland. “It’s important to note that any other items of electronic equipment and valuables which are not included in these restrictions, such as cameras and MP3 players, but which have been checked in to the hold by customers, will not be covered.”
Huet also raises the issue of whether travellers whose flights originate elsewhere but travel to the US or UK via one of the affected airports will be affected by the restrictions. Abu Dhabi, Doha, Dubai and Istanbul are popular stopover hubs for travellers from Asia and Australia. “If a flight starts in India and goes to the US via Dubai, are Indian authorities going to apply the same rules?” she asked.
In Australia, as in the UK, there has been confusion over whether laptops and other items carried in hold luggage will be covered, but Australian law seems to imply that they will be. Industry sources say Australia’s Insurance Contracts Act implies that travel policies must provide cover for travellers if their airline insists that laptops and other devices must be carried as hold baggage. Some, including Fastcover, an Australian insurer whose policies are underwritten by Allianz, and 1Cover Travel Insurance, have said they will now cover electronic devices transported in the hold luggage if the airline requires them to be checked in.
However, some industry voices warn that this newly relaxed approach may change if the restrictions remain in place. Stephen Howard, head of product at TIFGroup, said: “If we were to take the long (and in some ways pessimistic) view of the how this ban could affect insurers’ behaviour, if the ban becomes permanent, travel insurers may well decide to withdraw from covering gadgets. This could lead some to start recommending that customers should take out specific annual gadget insurance with a travel extension.”
Almost inevitably, he added, the ban will lead to an increased number of claims, and when this happens, premiums will increase, sums for insured losses are reduced, and the policy excess goes up.
“In an ideal world,” concluded Howard, “travel insurance would not look to cover gadgets as a standard cover – this is now an additional risk which the technological world has imposed on the travel insurance profession.⬛