The travel industry has been hit hard by the significant challenge arising from the Covid-19 pandemic. What started in late December and early January in China has now had the most significant impact on the world as a whole and in particular on the travel industry.
Issues began to arise in January 2020 regarding to travel to the Far East and then particularly to Italy. On 17 March the Foreign and Commonwealth Office [FCO] advised against all non-essential travel overseas, initially for a period of 30 days and this effectively brought travel overseas to a complete standstill leading to hundreds of thousands of holidaymakers and business travellers either not being able to take their holiday or having difficulties in returning to Britain.
On 23 March the FCO advised all British travellers to return to the UK. British people who decide they still need to travel abroad must be fully aware of the increased risks of doing so and these include the risk that they may not be able to return home if travel restrictions are put in place either by our government or elsewhere and that they may not be covered by travel insurance.
These advices from the FCO and the fact that we are in the midst of near total lockdown mean that airlines and tour operators face a short and medium term future which is unprecedented in terms of their challenges ahead.
Other stakeholders in this evolving crisis are the travel insurers.
In general where tour operators cancel holidays, ferry companies cancel ferry trips and airlines cancel flights then they should refund the customer's monies. This is generally governed for the most part by European Union Regulations. For most cancelled air flights (subject to some exceptions) EU Regulation (EC261) will govern refunds and the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR) demand that tour operators too should make a refund for a cancelled holiday within a relatively short period of time.
We would stress that additional "compensation" which might normally be paid in the case of a cancelled flight for example does not have to be paid, because COVID-19 has been deemed an exceptional circumstance by the EU Commission. That does not affect the requirement to make refunds.
Understandably with such financial pressure on airlines, cruise operators and tour operators at this time then these refunds have not been made in a timely fashion and some tour operators are also trying to rely on force majeure arguments - wrongly as the PTR does govern the fact that refunds are due.
Travellers are frustrated and often seek then to make a "cancellation claim" upon their travel insurance policy.
Policy wordings differ from insurer to insurer and scheme to scheme. Of course sometimes the customer has made the cancellation themselves and whilst it is not possible in this note to go through each scenario in turn, it is usually the case that where the airline, ferry operator, tour operator or cruise operator has cancelled then it is for them to make the refund - rather than the customer to recover their holiday cost or flight cost from their travel insurer.
There are of course scenarios where travel insurance will fall to make a payment but it should not be assumed by consumers that travel insurers are always the responsible body to do this.
On 20 March the European Commission updated its guidance on the regulatory position which means that European Regulations will now allow tour operators in European countries to give the customer a choice between refunds and vouchers. Some countries, Italy and Malta for example, have gone further and give the choice to the tour operator and not the consumer, i.e. the tour operator can offer a voucher only.
In Britain, at the time of writing, ABTA is pressing the government to bring in legislation to relax elements of the PTR and allow tour operators to issue vouchers as a future holiday credit. The proposal is that the vouchers would be backed by the government so that if at the end of the day the customer does not use that voucher, a refund would be made.
If a voucher is given and accepted by a customer, then that customer will not have suffered a loss and there will be no cancellation claim to their travel insurer.
Such a change is expected within coming days and weeks, and may hold a key to why many customers have not yet had a refund as companies hold on and wait for these anticipated changes.
Our dedicated travel insurance team is working with many in the industry looking closely at what the future may hold and assisting with regard to claims made for both cancellation and curtailment.