This past 2 years has seen a number of travel companies go bust, leaving a trail of misery in their wake for Consumers!  In recent days there has been a great deal of angst over what some see as a ‘loophole’ in the Package Travel Regulations.  The argument is complex and has all the potential for litigation between trade bodies, insurance companies, Consumers and possibly government departments – it is yet another branch of holiday complaints arising!  Let me try and explain; if we acted as a travel trade body and gave Consumers a 100% guarantee that their money was safe, in the event that one of our members ceased trading, that would give a great deal of comfort to Consumers.  There is a requirement within the Package Travel Regulations to provide bonding/insurance to protect Consumers from losing their money where a company goes into liquidation. Therefore, as a travel trade body, we want to make sure that our member’s customers can be confident in the product they are purchasing and we will promote that ‘benefit’ to Consumers!

Imagine then that one of our members goes into liquidation and to our horror, we discover that the insurer for the member refuses to provide cover for the affected holidays, because our member apparently did not disclose ‘material information’, which would have allowed the insurance company to assess the level and nature of their risk.

Failing to disclose ‘material information’ is not a new phenomena, if you take out travel insurance and fail to disclose pre-existing conditions, your cover will be withdrawn; the same applies to all domestic, motor and commercial policies!

This worst case scenario now places us as a trade body in a bit of a pickle, because it could be argued that we will take the place of the failed insurance and provide cover for the affected holidays!  If that were the case, then we would have to take some swift action to change our ‘public guarantee’, to ensure that our organisation could continue to operate.

The arguments state that this is a loophole within the Package Travel Regulations, I am not so sure that there is a loophole!

In this article (dealing with the real life situation), the IPP raise questions about why the Insurance company withdrew their cover, stating that “quite obviously there is more behind this incident than has been reported”.  They offer different theories and raise the point that in some insurance issues, questions of fraud may be relevant.

In this article, AITO state that in order to reinstate their 100% guarantee, “Either all members need to be bonded or insurance companies have to offer guarantees that they will not renege on the cover that has been bought on consumers’ behalf”

In the same article, the spokesperson for AITO offered the reason why this situation had arisen by stating, “This case is, in a way, a perfect storm scenario – economic crisis, the withdrawal of credit by banks, big group bookings and children involved”

Consider the comments of David Burdon (in the user comments section) who states, “Now, I don’t know the full facts surrounding the Skiing Europe collapse but the use of the term “Material non-disclosure” rings alarm bells. All insurance contracts are subject to the principle of ubirrimae fidei – or utmost good faith. Now its not huge news that somebody has failed to disclose all the material facts when taking out an insurance policy”.

As if to underline the previous comments, consider the BBC News report of Police action!

I have no wish to rain misery upon AITO, they have a difficult situation to deal with and they have to find a way to restore confidence with Consumers.  However, on a much broader issue to do with collapsed travel firms, I want to offer the Consumer view on what should happen!  Consumers expect:

1. That all person(s) operating a travel company are fit and proper persons;
2. That all those operating travel companies undergo a criminal record and ‘viability’ check before they operate;
3. That those operating travel companies have relevant experience;
4. That those operating travel companies have relevant professional qualifications;
5. That those companies state clearly and openly their willingness to abide by and operate within regulatory environments;
6. That there are clear statements about the handling of client monies and that the Consumer can see the ‘trail’ of how their money is kept;
7. That those operating travel companies are required to become members of travel trade bodies, and
8. That those travel trade bodies and their members are subject to independent scrutiny/on the spot checks, through a regulatory environment;
9. That the law imposes criminal sanctions on those failing to comply with its provisions, particularly on financial issues.

Whilst the new draft of the Package Travel Directive will hopefully firm up on financial protection (and other matters including so-called DIY Holidays), the reality is that we all exist in a market where Insurance Companies in particular, will ensure that their base in going to be covered.  Insurance Companies operate as per ‘market conditions & expectations’.  I certainly cannot see any insurance company giving ‘carte blanche’ to insurance cover without checks and balances in place, can you?

Equally, I am not sure that the Package Travel Regulations demanded anything more, do you?

Tags: Holiday Financial Protection

This entry was posted on Thursday, July 28th, 2011 at 12:11 pm and is filed under Political Lobbying, The Crows Nest. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.