Insurers brace for impact
The latest research from Finaccord, Travel Metrics in Europe, gives details of how last year’s Icelandic eruption affected the rate of travel insurance claims in 2010. Mandy Aitchison delves into the report for more information As Finaccord’s report was released, the Grimsvotn volcano, also in Iceland, was spewing ash into the air, again affecting the flight plans of thousands of people. Soon afterwards, the eruption of the Chilean volcano began to affect flights into and out of Chile and Argentina, with knock-on effects felt in Australia, New Zealand and Africa. Finaccord’s survey has provided detailed analysis of the travel habits, insurance uptake and claims behaviour of 6,000 consumers in France, Germany, Italy, the Netherlands, Spain and the UK. A unique feature of the research, according to the company, was to allow claimants to indicate the primary reason why they had made a claim against their travel insurance policy, and given the time period covered by the survey, these included various options which were specific to volcanic ash. The survey showed some interesting results, with Simon Tottman, a consultant at the research firm, commenting: “Across all respondents covered by the European survey, travel insurance claims resulting directly from the chaos caused by the Icelandic eruptions of April 2010 accounted for 5.4 per cent of all reported claims. Whilst this may, at first glance, appear relatively insignificant, it should be borne in mind that the air-traffic disruption caused by the volcanic ash lasted only a few weeks, whereas the survey as a whole was based on respondents’ most recent trip undertaken during 2009 and 2010.” In overall terms, the most common reasons for submitting a travel insurance claim were lost, stolen, or damaged baggage or belongings, medical expenses incurred while travelling, and accidents incurred while travelling. None of these core areas of claims activity were specifically associated with volcanic ash. However, within the universe of claims relating to flight or trip delay and cancellation, postponement or interruption, the volcanic ash cloud was seen to have had a substantial impact, and accounted for 31.1 per cent of all such claims. The detailed breakdown of this particular segment of claims activity is shown in the chart below. Tottman said: “The fact that last year’s volcanic eruptions had a particularly strong effect on insurance claims related to trip delay and cancellation means that the current situation (the eruption of Grimsvotn) could once again represent particularly bad news for distributors and underwriters of basic or ‘value’ travel insurance policies, as these policies are often configured specifically to cover trip cancellation, either alone or in conjunction with a small number of other risks.” He went on to point out that basic travel insurance is also commonly offered by airlines. Ryanair, for example, offers its customers two levels of coverage: ‘economy’, which just covers cancellation and personal belongings; and ‘standard’, which is a more comprehensive travel policy. For a distributor or an insurance company, having a large and sudden influx of claims against what are, for the consumer, very cheap policies, is clearly not ideal. It should be noted that the Travel Metrics research and the data included only relates to travel policies held by individual consumers, while the insurance consequences of volcanic ash disruption run deeper than this.
The latest research from Finaccord, Travel Metrics in Europe, gives details of how last year’s Icelandic eruption affected the rate of travel insurance claims in 2010. Mandy Aitchison delves into the report for more information
As Finaccord’s report was released, the Grimsvotn volcano, also in Iceland, was spewing ash into the air, again affecting the flight plans of thousands of people. Soon afterwards, the eruption of the Chilean volcano began to affect flights into and out of Chile and Argentina, with knock-on effects felt in Australia, New Zealand and Africa. Finaccord’s survey has provided detailed analysis of the travel habits, insurance uptake and claims behaviour of 6,000 consumers in France, Germany, Italy, the Netherlands, Spain and the UK. A unique feature of the research, according to the company, was to allow claimants to indicate the primary reason why they had made a claim against their travel insurance policy, and given the time period covered by the survey, these included various options which were specific to volcanic ash.
The survey showed some interesting results, with Simon Tottman, a consultant at the research firm, commenting: “Across all respondents covered by the European survey, travel insurance claims resulting directly from the chaos caused by the Icelandic eruptions of April 2010 accounted for 5.4 per cent of all reported claims. Whilst this may, at first glance, appear relatively insignificant, it should be borne in mind that the air-traffic disruption caused by the volcanic ash lasted only a few weeks, whereas the survey as a whole was based on respondents’ most recent trip undertaken during 2009 and 2010.”
In overall terms, the most common reasons for submitting a travel insurance claim were lost, stolen, or damaged baggage or belongings, medical expenses incurred while travelling, and accidents incurred while travelling. None of these core areas of claims activity were specifically associated with volcanic ash. However, within the universe of claims relating to flight or trip delay and cancellation, postponement or interruption, the volcanic ash cloud was seen to have had a substantial impact, and accounted for 31.1 per cent of all such claims. The detailed breakdown of this particular segment of claims activity is shown in the chart below.
Tottman said: “The fact that last year’s volcanic eruptions had a particularly strong effect on insurance claims related to trip delay and cancellation means that the current situation (the eruption of Grimsvotn) could once again represent particularly bad news for distributors and underwriters of basic or ‘value’ travel insurance policies, as these policies are often configured specifically to cover trip cancellation, either alone or in conjunction with a small number of other risks.” He went on to point out that basic travel insurance is also commonly offered by airlines. Ryanair, for example, offers its customers two levels of coverage: ‘economy’, which just covers cancellation and personal belongings; and ‘standard’, which is a more comprehensive travel policy. For a distributor or an insurance company, having a large and sudden influx of claims against what are, for the consumer, very cheap policies, is clearly not ideal.
It should be noted that the Travel Metrics research and the data included only relates to travel policies held by individual consumers, while the insurance consequences of volcanic ash disruption run deeper than this.