First published in ITIJ 101, June 2009
After rattling travellers, tour operators and insurers, the dreaded swine flu has unquestionably tested the preparedness and resolve of those involved in the travel and insurance markets. Milan Korock investigates what he describes as a ‘wake up call’ to the industry
The sudden eruption of swine flu out of Mexico not only scored a heavy punch to a tourism industry already reeling from overcapacity and economic anemia, but sent dazed travellers back to the drawing board to struggle with fine print that was sometimes contradictory, often obscure, and too often inconsistent with what they were hearing from tour companies, air carriers, cruise lines and their own governments. In short, the message left by the highly contagious flu, now given the upscale title of H1N1 virus (thanks to governments protective of their pig farmers), was caveat emptor and don’t expect to get your holiday money back without a struggle.
When it first emerged, virtually overnight in April, swine flu primarily hit holiday and business traffic into and out of Mexico, but within days cases were confirmed throughout the United States and Canada, the remainder of the Americas, as well as in the UK, Europe, Asia, and Australasia. Airlines promptly cancelled flights and began handing out surgical masks, travel insurers took to their websites posting warnings about what would be covered should their customers or their itineraries be disrupted by swine flu. Tour companies sent empty planes to repatriate vacationing clients, cruise ships wiped Mexico off their charts and sent their boats to alternate ports; governments posted advisories warning their citizens to avoid all ‘non essential’ travel to Mexico; border agents went on heightened alert looking for sicker than normal people. China even temporarily quarantined a group of students suspected of carrying the flu from Canada (none of whom had been to Mexico but as Canada was one of the primary vectors with numbers of confirmed cases, they were suspect nonetheless). China also banned the importation of Canadian pork, just as an afterthought. And throughout it all, holidaymakers, honeymooners, backpackers and business travellers sat disconsolate on their bags in airports waiting to be repatriated, or to be given the news that their flights had been cancelled and they best check with their carriers, tour companies or travel insurers for recourse.
Covered or not?
Virtually all insurers would cover travellers for swine flu symptoms and treatment contracted at their destination – so long as they didn’t travel there after their government had warned against it. But dealing with the prospect of rearranging thousands of dollars worth of travel after their trip had been cancelled or interrupted, was not so straightforward.
Thomson, Thomas Cook and others in the UK immediately announced stoppage of trips to Mexico, sent empty planes for those who wanted to return and told their customers they could get credits for flights to different destinations. Thomson reported it had approximately 2,500 customers in Mexico at the time, Thomas Cook about 3,000. Thomas Cook said passengers due to fly within the next seven days could re-arrange their travel but not claim a full refund. Thomson offered refunds for a limited time and allowed customers to rearrange their plans at no extra cost – up to their original value.
Will customers in future be satisfied with the insurance products they are offered to protect against such threats … How can they trust government advisories if vendors and suppliers put their own spin on how to interpret them?
Montreal based Transat AT Inc., Canada’s largest tour operator, postponed flights to Mexico until 1 June, and sent equipment to pick up its customers and staff as did Air Canada and Air Canada Vacations. Air Canada told stranded passengers they would be allowed to rebook at a later date to different destinations, but would not receive refunds – a common practice among other airlines.
In the US, most airlines cancelled flights to Mexico, but full refunds were hard to come by, the airlines offering rebooking to other destinations; not much consolation for people who had Cancun, Cozumel or Acapulco firmly in their sights. American travel insurers also rushed to get advisories on what was coverable vis a vis swine flu up on their websites, several making a strong pitch for customers to add Cancel for Any Reason or Change of Mind supplements in future to their more standard interruption or cancellation policies. The cancellation clauses of insurers such as CSA, Travel Guard, Travel Insured, and TravelSafe, however, did kick in if the policyholder wanted to cancel their trip because they didn’t feel safe and were worried about swine flu.
Much of the reaction from tour operators, airlines and travel insurers has hinged on the actions of their own governments in ‘advising’ their citizens about travel to certain countries. Many governments have tiered systems of advisories: cautionary, avoid certain areas, avoid all non-essential travel, and avoid all travel.
Normally, once the government warns against travel to a given country (in this case Mexico because of swine flu) certain protocols kick in – or are supposed to. But that does not mean adherence is universal.
Nathan LaFayette, executive vice president of Travel Guard Canada, said that in the case of Mexico and swine flu, once Foreign Affairs and International Trade Canada advised Canadians to avoid non-essential travel to Mexico, coverage was available to policyholders for cancellation or for costs to re-route around the region, and if an insured were in Mexico when the warning was issued, the insurer would pay to bring them back home. “No trip cancellation coverage is available if the policy was purchased after the warning was issued,” he clarified. Generally, that is the pattern followed by most insurers.
American travel insurers also rushed to get advisories on what was coverable vis a vis swine flu up on their websites, several making a strong pitch for customers to add Cancel for Any Reason or Change of Mind supplements in future
Interviewed in the UK by ITIJ, marketing and PR executive for Essential Travel Ltd Jennie Sheldon said: “Virtually no insurance policy will offer cover for travel to a country to which the FCO (Foreign and Commonwealth Office) is advising against all but essential travel. It now falls into the general exclusions section of our insurance policies and we are unable to offer cover for anyone traveling there.” If, however, a vacationer bought a trip to Mexico several months ago, said Ms Sheldon, “We advise them to speak to their airline, hotel, tour operator or travel agent, who should be able to offer an alternative holiday or a refund. However, our underwriter AXA has taken the decision to give consideration, on a contingency basis, to cancellation or curtailment claims from those customers who are able to demonstrate that despite exhaustive attempts, they have been unsuccessful in seeking redress from any of those other sources.” Note the word ‘exhaustive’. Getting refunds out of cash strapped airlines or tour operators can be exhaustive indeed, but what about travel insurers?
Some of the best practical advice about applying travel insurance to swine flu and similar situations was issued in a press release by the Travel Health Insurance Association of Canada, which urged travellers to always get ‘a clear, plain language explanation of their trip cancellation benefits and how they integrate with the benefits and exclusions of their air carrier, tour company or cruise line’. It further said that policies have limitations and exclusions so travellers need to understand where they stand ‘should their trip to a given destination be suddenly cancelled, or should their destination resort close down, or should their government issue an advisory warning them not to travel to a certain country or parts of it’.
The California Insurance Commissioner, on 30 April, warned travellers that not all insurance policies will fully reimburse trip cancellations due to the H1N1 flu outbreak. Steve Poizner said that ‘cancel for any reason’ policies, which are available at an extra cost, are the only types of travel insurance that will typically reimburse a policyholder for reasons pertaining to the H1N1 flu. “Travellers should educate themselves on their travel insurance options and decide which, if any, travel insurance product might be appropriate for them,” he said.
Cancel for Any Reason or Change of Mind policies allow purchasers to pull out of a trip if they sense trouble on the horizon, but coverage is not absolute and there are limitations. In Canada, Manulife Global states: “If you change your mind and decide not to travel for any reason before you leave home and you have booked your trip and purchased this insurance from the same travel agent, we will pay up to 50 per cent of the covered amount for the prepaid portion of your trip that is non-refundable and non transferable to another date. You must cancel your trip 16 days or more before your departure date.”
Are travellers caught in the middle?
In the UK, Which?, the consumer rights group, has accused some travel insurance companies of acting unreasonably by refusing to compensate policyholders for not travelling to Mexico after the FCO warned against it. Which? says there are too many impediments to claiming a refund on the cost of a holiday, in that many insurers are only offering to cover the cost of altering the holiday destinations offered by the travel company.
The country’s travel association ABTA said in a statement that it believes most travel policies won’t cover policyholders for cancellations due only to official government guidelines or to travellers cancelling of their own will. The Association of British Insurers, however, insists that most UK travel insurance policies do cover this type of cancellation and that policyholders should check with their insurer to make sure of that.
The lesson of swine flu is that this is not a ‘Mexican’ phenomenon but a generic one and it can happen anywhere, at any time. Though the WHO has warned of a possible pandemic arising out of the Mexican flu variant, to date the repercussions have been quite modest, certainly not on the scale of SARS. That might yet change, but to date this has been more of a wake-up call than a raging fire.
Will customers in future be satisfied with the insurance products they are offered to protect against such threats, will they demand more, and will they accept airline assurances that they can trade in one location for another but overlook refunds? How can they trust government advisories if vendors and suppliers put their own spin on how to interpret them? And will they tolerate having to read pages and pages of fine print just to find that the liability for covering them has shifted to another player somewhere down the food chain?
In the UK, Which?, the consumer rights group, has accused some travel insurance companies of acting unreasonably by refusing to compensate policyholders for not travelling to Mexico after the FCO warned against it
Can tour companies sustain many more of these wake-up calls? According to Price Waterhouse Coopers, between January and March 2009, 27 British travel companies collapsed compared to 11 in the same period last year. Over the past 12 months, some 78 companies have failed, up from 49 the previous year. It warns that this coming September – when cash flows slow following the peak summer period – will see another rush of failures. That is the same month that XL, Britain’s third largest operator, collapsed last year affecting up to 300,000 holidaymakers.
In the end, we may find that the Mexican swine flu was but a blip on the world’s growing pandemic fear meter. But it has clearly left behind many questions about how prepared the travel industry and its various components – including travel insurers – are in dealing with any repeats – big or small.