New Ash Cloud Blows Out Travel Insurance Policies

As Iceland’s most notorious volcano continues to erupt, travel insurers are reluctant to offer coverage

New policyholders may not be able to obtain insurance against future flights grounded by the volcano “pa-lava” which again is disrupting air travel in Europe, and this time areas where no-fly zones have been designated include France, Italy and the west coast of Spain.

Insurers are now saying it’s highly unlikely that they will pay compensation for cancelled flights and the news comes with the summer holidays fast approaching.

Aviation experts are warning that there could be more cancellations in the coming months and independent travellers booking their own flights are finding it hard to locate any insurer prepared to pay up against future cancellations. Insurers who did compensate passengers during the first travel chaos episode are now saying they will not, going forward.

HSBC and BIba (the British Insurance Brokers Association) paid out last time but say they are unlikely to do the same for policyholders who have just bought cover. BIba announced in April that all claims made under the company’s Protect travel insurance policies would be honoured but that those who have purchased policies since the original disruption cannot be covered.

RBS had offered payouts for policies held under its various brands including NatWest and Direct Line and has yet to confirm whether it will pay out or not going forward. Flybe’s exclusive volcanic ash policy, launched last week on the company’s website for £6.99 per person, has just ended. Customers buying holidays independently should get some cover from their airline if they are travelling within the EU, or on an EU airline, but this does not extend to pre-booked hotels, car hire or any other arrangements at their destination.

Although the cost of emergency accommodation while waiting for a flight can be reclaimed from an airline, money lost as a result of a hotel cancellation can’t. Under normal circumstances, travel insurance would cover this but a spokeswoman for Holiday Which? said the consumer organisation could not find an insurer willing to confirm upfront that it would cover cancellations directly resulting from the “ash” crisis. The only way to fully protect yourself is to buy a package holiday, it seems. Under current regulations, if a flight gets cancelled then the travel operator must offer a rebooking or even a refund of the whole holiday.

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