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What use insurance when your ship operator sinks?

February 22, 2017 Headline News 1 Comment Email Email

To avoid facing disastrous losses when a travel supplier collapses or an agent goes bust, Aussie travellers are advised to take out travel insurance that covers supplier and travel agent insolvency. There is just one problem – and it’s more than enormous.

The problem is this: there is no such insurance policy.

No insurance policy available in Australia covers travel agent insolvency, as far as can be ascertained. What’s more, policies that cover supplier insolvency often do so only partially, carrying numerous caveats that make reading the small print essential.

The stark choices facing Australian travellers, and the big losses they face when things go wrong, were outlined perfectly by a reader’s letter last week to the Fairfax travel site Traveller.com.au: http://www.traveller.com.au/ and @TravellerAU on Twitter

The letter writer, left out-of-pocket by a travel collapse, warned others about “a recent experience that everyone should be aware of”. The  letter was chosen as Traveller’s Tip of the Week.

The writer lost a lot of money with the collapse of British firm All Leisure Holidays Limited, trading as Swan Hellenic and Voyages of Discovery. The letter is worth quoting in full because it sheds light on the current situation in the post-Travel Compensation Fund (TCF) era.

A year ago we booked a “Voyages of Discovery”, Singapore to Cape Town cruise and flights package. http://www.rembrandtbkk.com/

Concurrently we booked travel insurance with NRMA – our long-time insurers for travel, home, contents and two vehicles. After lengthy discussions and several calls with two NRMA representatives about the appropriate and highest level plans – the “International Comprehensive Plan” was recommended. 

We agreed and paid the required total of $1700 over the phone. Confirmation documents, receipt and product disclosure were emailed subsequently, so we thought all was good with our “unlimited cancellation” policy. Then the shock a month ago – the parent company, Swan Hellenic, had gone into administration. 

Our subsequent claim for compensation for the $32,000 paid has been knocked back by NRMA and Cover-More Insurance because “insolvency” was not covered (second last clause on page 45 of a 46 page document) – which we hadn’t picked up. They are still refusing to refund anything.  Lucky British citizens are covered by their government and member associations – not so in Australia. 

Our advice is to only insure with those companies that are open and upfront about the insolvency cover offered. 

Dru Daly, Surfers Paradise, QLD

The Traveller supplement appears in print in Fairfax publications such as the Sydney Morning Herald, The Age and Canberra Times – and so did the letter.

As it happens, another section of Traveller, Expert Opinion, features a very relevant answer to a reader’s question about travel insurance. 

Q. Are there travel insurance policies that cover against insolvency, since Australia has no compensation scheme for travellers who lose their money to a travel agency?

The answer was supplied by Fred Schebesta, co-founder and director of finder.com.au, Australia’s largest comparison website.

“No travel insurance covers travel agent insolvency,” Schebesta confirmed, “however some insurers cover travel providers going under, such as airlines or tour operators.

“For example, Go Insurance will cover you up to your policy limits for irrecoverable prepaid travel, accommodation, car hire and excursions costs, and the reasonable cost of alternative travel arrangements. Levels of cover differ so it’s important to read the Product Disclosure Statement carefully. If you don’t have travel insurance and your travel provider goes bust, your bank may be able to claim on your behalf a chargeback for any expenses that were made on your credit card.”

The exchange illustrates the precarious situation facing Australian travellers. TCF coverage has disappeared (along with the TCF) and no insurer will cover agency insolvency.

AFTA is looking into the matter, because of the alarmingly different ways Australian and British consumers were treated after the All Leisure collapse. In Britain, travel consumers were well protected. The Association of British Travel Agents (ABTA), AFTA’s UK counterpart, said that about one third of the 13,000 or so future bookings on the collapsed firm’s books were UK-departing cruises so financially protected by ABTA. The rest were protected under the company’s Air Travel Organiser’s Licence (ATOL). See: Massive losses among Aussies puts travel under cloud

As for Australian travellers, the reader’s letter above illustrates their predicament. The extensive adverse media coverage generated by the All Leisure collapse in the UK would be duplicated in Australia if such a thing happened here – but it would be far worse, because many Australian victims would most likely be entirely unprotected.

AFTA chief executive Jayson Westbury has confirmed that AFTA is engaging with ABTA on the matter and may come up with some suggestions soon.

Meanwhile, the iconic Swan Hellenic brand, a 60-year-old pioneering cruise line and a respected name in the boutique cruising sector, has been acquired by G Adventures. John Warner, vice president of Global Sales, G Adventures, says the company is determined the legacy of this great cruise brand will live on.

“We know how beloved Swan Hellenic is to its loyal customer base and respect it has in the British travel community. Our long-term aim is to re-launch Swan Hellenic and re-establish the award-winning values that make it so well-loved.”

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. Noel says:

    I find it somewhat farcical that AFTA is “engaging with ABTA on the matter and may come up with some suggestion soon” as they along with the various state governments were major parties involved in the decision terminating of the TCF and the distribution of its surplus funds.
    It is a pity that warnings about the possibility of this kind of collapse were brushed aside by those august and omnipotent bodies.

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