Comprehensive cover taking priority as ash chaos sparks eruption in policies

Published on Friday 23 April 2010 21:37

DEMAND for travel insurance soared this week in the wake of the chaos caused by the volcanic ash cloud. And comprehensive cover is taking priority over cheap policies as the fall-out from the disruptions highlights the limitations of some travel insurance.

With just a quarter of travel insurance policies allowing for volcano ash disruption, many holidaymakers who incurred extra costs as a result of the delays will receive less compensation than they had hoped for. A lack of consensus among insurers regarding volcano-related claims means that while some are fully reimbursing customers, others are making only nominal goodwill payments.

The Association of British Insurers (ABI) has not insisted on a standard response from its members and continues to advise those affected to clarify their compensation position with their insurer. Nick Starling, director of general insurance and health at the ABI, said: "While a volcanic eruption is not a specific insured event covered in insurance policies, some cover for delay and travel abandonment may be available, depending on the level of cover purchased by the policyholder and the terms and conditions."

However, this will vary between policies, with delay payments typically a fixed amount up to a maximum figure, not an open-ended sum.

Starling added: "Where this event is not specifically covered by your insurer, some are offering ex-gratia payments for customers stranded abroad."

The disruption has driven a 27 per cent increase in travel insurance searches on Moneysupermarket.com.

Bob Atkinson, travel expert at the web comparison site, said: "We have seen a significant shift in the number of Brits looking for 'premium' policies, too – quality policies that offer more comprehensive levels of cover, and insure for trip delay and scheduled airline failure and end-supplier failure for example. It's certainly not just about price any more."

Meanwhile, the cost of car insurance has been forecast to resume its upward trend after AA Insurance yesterday revealed that premiums stalled in the first three months of the year. The average premium quoted for comprehensive car insurance fell by 3.2 per cent in the first quarter, with the biggest falls seen in Scotland.

But Simon Douglas, director of AA Insurance, predicted that premiums would rebound significantly over the next six months. "Insurers no longer have reserves on which to call to keep premium rises in check. The same pressures as last year continue … fraud and personal injury claims especially remain a significant concern."