New research from Finaccord, an FS research consultancy examines the impact on travel insurance of consumers in six key European markets, including the widespread effects of last April’s volcanic ash cloud originating from Eyjafjallajökull in Iceland.

Finaccord’s Travel Metrics survey provides 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. One unique feature of this research was to allow claimants to indicate the primary reason why they had made a claim against their travel policy; given the time-period covered by the survey, these included various options which were specific to volcanic ash.

“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% 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”, comments Simon Tottman, a consultant at Finaccord.

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 to trip cancellation, postponement or interruption, the volcanic ash cloud was seen to have had a substantial impact, and accounted for 44.6% of all such claims. The detailed breakdown of this particular segment of claims activity is shown in the chart overleaf.

“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 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”, continued Simon Tottman.

This type of basic travel insurance is also commonly offered by airlines. Ryanair, for example, offers its customers two levels of coverage, namely ‘economy’ (covering just cancellation and personal belongings) and ‘standard’ (a more fully-featured, 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 remembered that Finaccord’s survey and the data discussed above only relates to travel policies held by individual consumers, whereas in fact the insurance-related (and wider financial) consequences of volcanic ash disruption run far deeper than this. As well as coping with an expensive logistical crisis, the airlines themselves are responsible for resolving certain elements of this disruption. Similarly, for travellers who have booked their flights or holiday through an ABTA or ATOL-licensed travel agent, the travel agent must also take care to honour its obligations to its customers.

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