Customers need to read the small print to avoid being disappointed by unrealistic expectations when it comes to compensation for cancelled trips. But are travel insurance vendors failing to make it clear what their clients are covered for? Robin Gauldie investigates
This has long been a thorny problem for the travel industry, and some might argue that the plethora of policies now available online – either from direct-sale sites or aggregators – may confuse customers even more. Insurers tend to say that the information is all there in the policy if customers take the trouble to look for it, but the prevalence of negative feedback from clients shows that many are still baffled by legal language, or by unclear definitions of conditions under which a claim will be allowed.
A common cause of confusion arises when clients are ill-informed about the distinction between ‘cancellation cover’ – which generally relates to events that arise before departure – and ‘alternative transport expenses’ or ‘travel delay’, relating to anything that happens after departure. Many clients also remain unclear over how responsibility for compensation and reimbursement of expenses is shared between travel providers, insurers, and schemes operated by national travel industry organisations or government bodies.
Recent events in the UK, where a meltdown of southern England’s main air traffic control system brought chaos to the busiest airspace in the world and caused hundreds of flight cancellations, should highlight this recurring issue and its significance for travel insurers and the broader travel industry.
Eventualities such as extreme weather events, emergency evacuation of tourists from destinations struck by unexpected civil strife – as in the events of the ‘Arab Spring’ – or high-profile air ambulance operations, may be more traumatic, but in practical terms, travellers are statistically more likely to be caught up in the humdrum reality of sitting in a crowded departure lounge – or, still worse, on an aircraft on the taxiway – while waiting to hear when or whether their flight will ever take off.
Increasingly, most of us realise that at some point, we are going to be among those huddled masses. Statistically, it’s inevitable. So it’s not surprising that many consumers regard trip cancellation cover as one of the most important elements of their chosen travel policy.
Perhaps it’s also unsurprising, then, that trip cancellation is a common source of customer complaints. It is, according to some sources, the most misunderstood element of travel insurance. “Feedback from customers shows that cancellation cover, travel delays and alternative transport expenses are the most misunderstood features of travel insurance,” said Natalie Ball, director of Compare Insurance, an Australian comparison website.
Recent events in the UK, where a meltdown of southern England’s main air traffic control system brought chaos to the busiest airspace in the world and caused hundreds of flight cancellations, should highlight this recurring issue and its significance for travel insurers and the broader travel industry
The most common negative comments that Compare Insurance receives stem not from refused claims, but from the misconception that all cancelled or missed travel situations are covered by insurance, Ball says. “We often read feedback from customers who are unhappy because of unpaid claims, but the majority of complaints are for situations that are not covered.”
The comparison site is trying to address the problem of customer confusion by issuing its own set of guidelines clarifying what is, and is not, covered by most travel insurance policies in terms of cancellation insurance (see news story, pX). It outlines the different responsibilities of travel suppliers, travel insurers, and clients themselves, reminding customers that their policy will cover only non-refundable costs that they have already paid for, and that they must prove that they have done their best to avoid unnecessary expenses due to delays.
“Cancellation cover is explained legally in policy documents as ‘lost deposits and cancellation fees for pre-paid travel arrangements due to unforeseen circumstances neither expected nor intended by you or which are outside your control’,” explained Ball. “A travel insurance policy is a legal document and yet so many travellers chose not to read the Product Disclosure Statement which explains in detail all the policy benefits,” she lamented.
Compare Insurance’s guidelines aim to cut through the legalese, defining clearly what is meant by ‘unforeseen circumstances’ and explaining when customers are covered for delays, cancellations and alternative travel arrangements. It points out that insurance normally covers clients for a range of scenarios, which include accidents that cause clients to miss flights; flight cancellations due to weather or industrial action; missed accommodation; extreme events which begin after the policy is missed; severe sickness, injury or death of the insured or a close relative; theft of passports or travel documents; disruption of journey; and alternative travel expenses.
“The most common misunderstanding is that all cancelled flights, for any reason, are covered,” said Ball. “This is not the case. For example, if your flight was cancelled due to a mechanical fault, overbooking, maintenance, repairs, rescheduling, service faults or the airline closing down then you are not covered. It is the airline’s responsibility to compensate, reimburse, or find an alternative flight for the traveller – not the insurer.”
Clients also need to be made aware that travel providers are responsible for reimbursing extra accommodation costs if a flight is cancelled because of a non-covered event such as a mechanical fault, Ball says. Compensation also becomes the responsibility of the travel provider when a tour operator cancels a package holiday due to underbooking. Compare Insurance’s guidance aims to make it clear that customers are not normally covered if they cancel their trip at a whim or for reasons such as cancellation of their annual leave, or exam dates that clash with travel arrangements.
Clients also need to be made aware that travel providers are responsible for reimbursing extra accommodation costs if a flight is cancelled
Might insurers in other markets – such as the UK or North America – follow Compare Insurance’s lead by giving similar sets of guidelines more prominence on their sites or in policy wording? Most seem to feel that the information is already there, and that it is largely up to the customer to read the small print – preferably before travelling, or even before buying a policy.
Jim Grace, president and CEO of US aggregator InsureMyTrip, says trip cancellation cover is the most popular product among customers buying travel insurance policies through aggregators in the US. Policies available through aggregators contrast favourably, he says, with those offered by online travel agencies and airline sites, which are often cheap and provide poor coverage. Travel insurance purchasers, Grace says, are increasingly choosing to visit aggregator sites which offer more comprehensive information about the product they are buying.
“Travel insurance companies try to clearly spell out their coverage in their policies,” confirmed Linda Kundell, a spokesperson for the US Travel Insurance Association (UStiA). “UStiA always recommends that travellers familiarise themselves with their policy, that they understand their policy, and that they contact the company whose policy has been purchased with any questions,” she added.
Travel insurance in the US typically reimburses the traveller up to a set amount for travel delay past a certain number of hours, and for cancelled flights under covered reasons. If the tour operator cancels, that is normally the tour company’s responsibility. Travel insurance would cover cancellations for reasons such as illness and weather delays, and will reimburse passengers if the airline or tour operator does not.
“UStiA always recommends that travellers familiarise themselves with their policy, that they understand their policy, and that they contact the company whose policy has been purchased with any questions,”
But some industry sources say that there is still confusion in customers’ minds when it comes to their level of cover for delays and trip cancellations. Unlike in Australia or the US, the role of the insurer in the UK when a flight is cancelled is relatively minor, says Sean Tipton, media relations manager at the British travel industry association, ABTA. But this is not always clearly understood by customers. “In the vast majority of cases, the client’s first recourse will be the airline or tour operator. However, the public are not fully aware of this, and insurers need to make it clearer,” Tipton says.
In the past, the insurance sector in the UK has received bad publicity because customers failed to realise that most cancellations are not the insurer’s responsibility. Insurers should also make it clear that in turning down claims in cases in which the airline or tour operator should provide compensation, they are not abnegating responsibility. “They need to clarify that the clients will be covered, but by the travel provider, not the insurer,” Tipton says. However, he added: “There are instances when the insurance company is the only place a customer can go, for example when a flight is cancelled due to extreme weather. The airline may take responsibility for compensation and rebooking, but people who are travelling independently, not as part of a package, may find that they are out of pocket for alternative accommodation expenses. This is one of the few areas where the only recourse is the insurer, and many policies do not cover clients for such expenses. Cheaper policies are, of course, more likely to have more exclusions.”
Most insurers will argue that it is the client’s responsibility to read the small print and understand what they are covered for and by which provider. “If an airline or tour operator cancels a trip or flight, it is down to them to refund the customer or provide an alternative trip. Insurance for travel delays usually applies after a number of hours’ delay. It will vary from scheme to scheme from five hours upwards,” commented Jade Trimbee, senior marketing executive at AXA Insurance. When asked how customers can be better informed about where a travel supplier’s responsibility to compensate passengers for delays, she said that customers ‘should speak to their travel agent or tour operator.’ Aggregators make information on policies widely available in their policy wording pages, Trimbee said, adding: “If the customer has a specific query about the terms and conditions, they should talk to their insurer.”
Via aggregators, AXA Insurance offers a high level of cover on products including Travel Disruption Cover (TDC), said Trimbee. Such products fill the gap between protection and compensation offered by travel industry principals such as airlines and tour operators: “The main sections of cover will be cancellation should a customer not be able to travel due to health reasons; this typically covers the gap between the tour operator refund and the cost of the holiday, less the excess. Curtailment cover provides cover for customers who need to return home early. We are not aware of any tour operator cover that applies here. Travel delay, missed departure and AXA’s TDC cover all provide elements of cover around trip delays.”
Most insurers will argue that it is the client’s responsibility to read the small print and understand what they are covered for and by which provider
Clarity of cover
Generally, between travel providers and travel insurers, travellers are quite well provided for in the event of cancellation. But it does appear that – if only to avoid bad publicity and the unnecessary administration hours incurred in turning down a claim and redirecting insureds to travel providers for compensation – travel insurers could spell out more clearly who takes responsibility in each scenario.