BA travel insurance row shows why consumer insurance law reform is needed

The day after the Law Commission published its Consumer Insurance Bill we are faced by a very good example of why it is needed as a row has broken out over how far travel insurers are obliged to cover people caught up in the British Airways strike.

The front page story in today's Metro goes right to the heart of what is reasonable in terms of disclosure and underwriting. It quotes the Association of British Insurers as saying that people who took out travel insurance after 2 November should have reasonably foreseen the scheduled 12 day strike by BA cabin crew. That is six weeks ago, note. Is that reasonable? I would argue that it is not and that to decline claims on those grounds would probably be seen as unfair on consumers under the new law.

As I read the Consumer Insurance Bill, underwriters would be expected to ask the prospective policyholders if they were aware of the possibility of a strike when they took out the policy. I do not think most people booking Christmas flights in the first week of November knew that there would be a strike between 22 December and 2 January. Frankly, if they did they wouldn't have booked with British Airways. If underwriters can show that insurers were clever enough to kn0w this was a likely outcome then why did they take people's premiums knowing that they were not going to pay out for this? It is this imbalance of knowledge (and thus power) that the Law Commission does not like and is trying to address in its proposals.

It might also be interesting to ponder the implications for any intermediaries who arranged travel cover for their clients that will not now payout. With the new clarity proposed on the law of agency in the Consumer Insurance Bill they might, in future, find that their clients would have a bone fide claim against them in such circumstances for not acting fully in their interests.

I would like to think the ABI might sit down with its members who underwrite travel insurance and consider whether it would be better to behave now as if the new law was in force.

16 Dec 2009

Topics: Travel insurance, Law Commission, British Airways, ABI

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It is a very interesting article and one that does not end with travel insurance. The mismatch I feel is between the publics interest in insurance and the industries knowledge. If you were to survey those individuals who took out travel insurance during that period many if not the majority would not have clicked. However it seems to me the insurance industry are assuming there is perfect information in the market and are thus aligning claim requirements with their own knowledge and no that of the consumer. A very difficult issue to tackle and one that will continue while profit margins are every ones main concern and not the greater good of mankind.

Posted by: Insurance Agency, 11 Feb 2010 | 08:59

I am cautiously getting ready to go around the world with my daughter. we're all extremely excited, but i am fantastically clueless when it comes to the ways of the world and how to not accidentally be offensive to people in different countries. i'm 60 years old and have never had the pleasure of travelling to another land, so it would be an understatement to say that i am a little bit nervous thinking about trying to do the smallest things while on my holiday. i commend you on giving us , to quote the title: "BA travel insurance row shows why consumer insurance law reform is needed (Parliamentary Connections)". I found the info extremely useful! Warm Regards, Car Hire France...

Posted by: Car Hire France, 17 Mar 2010 | 11:38

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