Delay cover deliberated
Last year, legendary US investor Warren Buffett moved into travel insurance with the creation of a new flight cover product from his Berkshire Hathaway Specialty Insurance arm. ITIJ considers the future of flight delay insurance
AirCare, launched last May, offered what it claimed was a unique flight-protection cover which, in return for US$25, would pay out $1,000 to travellers for tarmac delays of more than two hours; $1,000 if a traveller experienced lost or stolen luggage; $500 if a flight delay caused a traveller to miss a connecting flight and $500 for luggage delayed for more than 12 hours. Customers had to purchase the protection one hour before their plane was scheduled to leave. It was also restricted to domestic flights.
The cover got off to a bumpy start. Only two months after launch, AirCare altered its conditions of cover, reducing the missed connection benefit from $500 to $250 and changing customers’ ability to buy from right up to the point of departure to 24 hours advance notice.
Industry wags, such as US-based travel rewards card comparison site MileCards.com, suggested it had been too easy for fliers to buy the coverage last minute on flights they knew had a good chance of being delayed: “Often, you can see when the flight coming into your gate is late even though your departing flight is still showing on time. We think AirCare had a hunch that a $500 benefit was too generous. The remaining AirCare benefits are pretty lacklustre and good for minor inconveniences but not the biggest headaches,” it said.
Brad Rutta, marketing director at Berkshire Hathaway Travel Protection (BHTP), says the move was in response to customer feedback. “It was to keep the price of AirCare affordable for our travellers.” He says AirCare is performing well. “AirCare answers a travel need that no other insurance provider addresses – affordable, fixed-benefit flight coverage. The initial response was remarkable and it continues to be extremely well received in the market, especially among travel suppliers and agents.” However, he does not reveal how much has been paid out to customers since the product’s launch, simply stating: “We’ve been extremely pleased with the sales results.”
AirCare is planning to add extra benefits and international coverage later this year. “We also have international market expansion plans over the next several years,” says Rutta, “We’ve simplified travel insurance. It’s easy to understand the payouts with our fixed benefit levels.” Despite this, Rutta says he isn’t aware of any direct competition from insurers offering similar cover. Similar cover does exist, though, and not just in the US – Bridge the World, part of the STA Travel Group, has a flight-only insurance product costing from £14 for a return trip and covering luggage, cancellation and personal accident cover.
But Richard Smith, managing director of the UK-based Travel Insurance Facilities Group (TIFG), is doubtful that flight-only insurance products are set to take off in the UK market: “Aircare is effectively a much reduced version of a UK travel insurance policy. Aside from the tarmac bonus, the other sections are fairly standard travel insurance,” he says. “Given that around 90 per cent of all claims in the UK travel insurance market originate from the emergency medical expenses or cancellation section of a travel policy, one must question if this is truly something that the UK market could really benefit from at this time; a major concern being that people would choose this option as a cheap alternative to a full travel insurance product and end up without the protection that they really need.”
Of more interest to Smith is the work that BHTP is doing to make it easier for customers to