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UK Travel Insurers faced with £275M COVID-19 related claims

Travel insurers in Britain could be hit with a record-breaking estimate of at least £275 million in claims over the Coronavirus outbreak.

This would be the highest pay-out to date for passenger flight cancellations. This is the expected total as pay-outs continue over the coming weeks and months, with the vast majority of claims realting to cancellations, according to calculations by the Association of British Insurers (“ABI“).

Record-breaking figures

The ABI reports that these figures are greater than the £62 million-worth of payments made for cancellation and disruption following the 2010 Eyjafjallajökull volcanic eruption in Iceland. The 2010 eruption produced a vast ash cloud, which caused substantial disruption to flights in Europe and pushed cancellation claims for that year to £148 million, a record at that time.

In this first quarter of 2020, around 400,000 claims are expected solely in relation to the COVID 19 pandemic, compared to the 294,000 cancellation claims relating to the volcanic eruption for the whole of 2010.

Indeed,  Direct Line, has already reported that it has experienced a rise of travel related claims from £1 million to £5 million in less than two weeks since the start of the month. You can read our full article on this here.

Mark Shepherd, of the ABI noted: “At this unprecedented time, travel insurers are helping to soften the financial blow for thousands of customers whose travel plans have been cancelled or disrupted by coronavirus.” The British Insurance Brokers’ Association considers that it is now “highly unlikely” that any cover for cancellation, abandonment or disruption of a trip because of Coronavirus will be available.

Re-definition of product lines

COVID 19 has forced insurers to retreat from product lines ranging from travel insurance to income protection. Compare the Market, one of the biggest insurance shopping sites in the UK said it had halted sales of income protection, due to fears insurers had effectively hollowed out the cover by introducing Coronavirus related exclusions. Event cancellation policies marketed also now tend to include exclusions relating to Coronavirus.

Comment

Insurance cover is based on assessing the probability of an event occurring. It is therefore no surprise that insurers carefully and critically assess the point at which a risk becomes more of a probability than a possibility, and then make commercial decisions. However, in these difficult times, insurers’ responses to this crisis will likely leave a lasting impression on current and potential customers. Therefore, sensitivity and caution needs to be given when dealing with change and reform of product line and policies.

© Copyright 2020 Squire Patton Boggs (US) LLP

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About this Author

Garon Anthony, Squire Patton Boggs, litigation attorney
Partner

Garon Anthony is a partner in the Litigation Practice Group. He has specialised in dispute resolution work since he qualified as a solicitor and has considerable experience in general corporate and commercial litigation work, acting for both private and public sector clients.

Garon regularly resolves disputes for clients in the financial services/insurance sector. That encompasses professional negligence, fraud issues/recovery processes, dealing with claims and complaints by customers of the mis-selling of retail products, handling insurance policy coverage disputes for corporate...

44 121 222 3507
Mariyam Harunah Debt Recovery Attorney Squire Patton Boggs
Associate

Mariyam regularly acts for a diverse client base, including, SMEs, FTSE 100 and 250 corporations, public bodies, developers, insurers and individuals.

Mariyam has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, misrepresentation, defamation, professional negligence, debt recovery and insurance.

Experience

  • Assisting on an approximately £160 million multi-action and multi-defendant claim following the sale of a company to investor clients.

  • Acting on a variety of disputes for clients seeking the recovery of unpaid monies owed pursuant to contract.

  • Acting on a portfolio of financial mis-selling claims for a leading international bank.

  • Advising a variety of clients upon termination of contract issues.

  • Acting for industrial manufacturers and suppliers in the defence of contractual and tortious disputes with technical complexities, arising out of the provision of allegedly defective products.

  • Assisting in the provision of bespoke and strategic advice to a national regulator dealing with persistent defamation and harassment.

  • Acting for a leading hire purchase provider in enforcement proceedings.

  • Assisting on a £500,000 negligence claim by a leading supermarket arising out of property damage and business interruption at one of its warehouses.

44 121 222 3175