ON TOUR: Travel cover unravels

Exposure to loss from cancelled flights and pre-booked hotels is adding to the woes of coronavirus. This insurance report was written by John Burke, who is a financial journalist as well as a travel writer.

The still developing pandemic and counter-measures are throwing the worldwide (re)insurance industry into turmoil, especially the sectors that provide travel cover.  At the time of writing, the attitude to existing and future policies, including annual ones, is varying from company to company and from day to day, such as adding conditions or invoking smallprint. There may also be differences regarding the insurance for business travel as such.

At least some subsidiaries of the French group AXA will not cover cancellation due to coronavirus, and Allianz will not cover anything related, although the Munich-based multinational does seem to have been admitting certain claims for a limited period.

Among British insurers, Aviva will not refund on disrupted holidays, while Admiral and Churchill have stopped writing new cover, and so has Direct Line, which, with 4m holders of travel policies (often packaged by NatWest and Nationwide), has already received coronavirus claims totalling £1m.

And here is a typical caveat from Insureandgo: “We have classed coronavirus as a ‘Known Event’ in line with the policy’s terms and conditions. For an element of a trip booked before 13 March, any subsequent claim will be considered in line with those. 

"For any element of travel after that date, we will not cover any claims caused by, or relating to corona, or any fear or threat concerning the virus.”

Although the Association of British Insurers (ABI) has issued a six-point pledge to customers, it warns that the Foreign Office advice of 17 March against non-essential travel currently provides underwriters with a wide and firm exclusion, although it also allows customers to claim for cancellation or disruption as of now. Many travel policies are eligible for extension, and claims should be valid for being stranded abroad, including quarantine.

Some out-of-pocket expenses other than food may be accepted, including for alternative repatriation, but ATOL conditions do not apply. Also separate is Scheduled Airline Failure Insurance that has become popular since the demise of Thomas Cook. As regards travel agencies, the ABI concludes: “Hardly any business has chosen to buy any form of cover that includes local closure due to an infectious disease.”

It is obvious common sense to heed governmental advice regarding destinations and healthcare, and then consult your insurer about the latest conditions, especially what counts as essential travel and banned entry.  Travellers on urgent business ought to be protected by their employers' duty of care, but make sure the company is fully compliant with the law – a point made at the Business Travel Show.

Although organisations or individuals are faced with the exclusion of coronavirus from a normal policy, cover might be possible through the British Insurance Brokers’ Association, which has close ties with Lloyd’s of London. This specialised market has long accepted almost suicidal risks such as war, kidnap, ransom and terrorism.

On the other hand, Hiscox and other syndicates rushed to exclude coronavirus as the reason for cancelling events, not least a long list in Australia, where Qantas has halted all international flights anyway. Cover-More in Sydney says Australians and New Zealanders catching coronavirus abroad may still be covered by its policies, but the insurer has stopped allowing a higher premium for Cancel For Any Reason.

This was also an optional extra among transatlantic insurers, who began excluding coronavirus from standard policies as of mid-January when they classified it as ‘a foreseen event’. Yet some American travellers are still getting both normal and urgent medical benefits on policies as well as cover for evacuation due to the illness. 

Automatic cover has long been available on some cards of American Express, which now says: “While we assess claims on a case-by-case basis, Trip Cancellation and Interruption Insurance provides reimbursement of non-refundable travel expenses, purchased with your eligible card, of up to $10,000 per trip. We are also working with our airline and hotel partners to implement any fee waivers or support they may be offering to affected travellers.”

There is, however, one class of underwriters in the USA who will not miss new premium income despite the grounding of so many aircraft. Remember those vending machines near the departure gates half a century ago when a handful of quarters would buy up to $65,000 worth of instant assurance against the risk of an air-crash on a scheduled flight? They are long gone from Stateside airports, but still stand in such countries as Japan and Taiwan.”

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