Remember the good old days when most travel insurance providers and distributors would offer flight delay coverage in almost all their policies?
Up until a few years ago, it was practically expected that you’d have decent hotel and food cover in most extensive delays.
But what happened?
According to Southern Cross Travel Insurance’s (SCTI) CEO, Craig Morrison, travel insurance providers took a step back from delay coverage after the aviation industry was completely disrupted by Iceland’s Eyjafjallajökull volcano back in 2010.
Remember that natural disaster?
Ash from the volcano resulted in the shut down of a large portion of Europe’s air space, causing major flight delays and cancellations, especially out of the UK. This was followed by major disruptions caused by the eruption of Chile’s Puyehue Cordon Caulle.
As a result, travel distributors and travel insurers redefined the biggest catastrophe that would cause their biggest losses from plane crashes to natural disasters and delayed aircraft, which meant a drastic decrease in our coverage during delays.
“When there’s a natural disaster it’s not just paying out insurance to those that are overseas, but everyone that hasn’t left yet.”
Craig Morrison, SCTI CEO
“We’re talking food and accommodation, which adds up.
“If an insurer has 20,000 people affected and that’s $1,000 a claim, that could equal around $20 million. That’s huge and could wipe an insurer out.”
While some other providers and distributors readjusted their policies to minimise losses during flight delays, Morrison said SCTI kept their policy competitive by offering up to $30,000 or 30 days in coverage.
“Some only offer around $1,000, maybe $2,000,” he said.
“But if you use the Europe volcano as an example, Paris hotels increased their hotel rates and we charging guests around 800 euros a night.
“If you only had a couple of thousands in delay cover then you’d be out of money in Europe within a matter of days.”
