Friday, December 11, 2009

Scheduled Airline Failure - A Consumer Success Story

Since Travel Insurance Insider penned the excellent article investigating the next airline to go bust insurers have now woken up to customers' demands.

This time last year, very few insurance companies incorporated a scheduled airline failure clause in to their policies. This was largely a legacy from a time when tour operators ruled the travel market and airlines going bust were both unthinkable and seemingly only a concern for industry bodies such as:

  • United States Tour Operators Association (USTOA)

  • European Tour Operators Association (ETOA)

  • Association of British Travel Agents (ABTA)

However, since the advent of low cost carriers and the accessibility of flight only purchases the role of tour operators has dwindled to the extent that even back in 2006 only 55% of all airline tickets were purchased through travel agents. (Source: PhoCusWright’s Travel
Agency Distribution Landscape 2006 - 2009).

Driven by the economising focus of airlines such as Easyjet and Ryanair, consumers revelled at the idea of circumventing travel agents' 12% profit margin and happily endorsed the process of disintermediation.

The idea of consumer ground-swells predicting the next airline to go bust is a recent phenomenon, but thankfully most insurers now offer scheduled airline failure cover. Typically this is sold as standard, and less often as an additional charge.

Turn the clock back a year and we viewed a different set of circumstances: Scheduled airline failure was omitted from many policies, considered a high liability should an airline go bust, generating a large influx of claims in a concentrated period.

It was only when airlines began folding and customers engaged the acid test of their travel insurance policies, that the lack of cover in this area was found to be unnacceptable and thanks to subsequent industry guidelines, scheduled airline failure is now available to the majority of policy holders.

Technorati tags; scheduled airline failure, next airline to go bust.

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