Only one in six travel insurance policies provide cover for the cost of airline failure, either as standard, or as an optional extra, Defaqto has warned after Scottish airline Flyglobespan collapsed.

That is a disgrace. When people buy travel insurance, they assume all the risks of their holiday being cancelled are covered. Too right. All those risks should be covered.

Some well-known travel insurers that do cover scheduled airline failure include Direct Line, Direct Travel, the Post Office, the AA, SAGA and Sainsbury's Finance, Defaqto said.

Belt and braces policies

The British Insurance Brokers' Association (BIBA) confirmed that its recommended policy, underwritten by Tokio Marine and purchased from a BIBA broker, covers both company collapses and strikes by airline staff.

The policies "will cover travellers providing the trip and insurance were purchased before the strike ballot was announced or, in the event of financial collapse before the financial failure was in the public domain," BIBA said.

But shame on the rest of the travel insurance industry. No wonder insurers have such a bad name. People pay their money and then find out when they make a claim that they are not covered. In this case, that could leave them stuck in a foreign airport in the run-up to Christmas.

Treating customers unfairly

Is that treating customers fairly Mr Regulator? The Financial Services Authority (FSA) has rules on treating customers fairly (TDF). Insurance sellers have to point out significant exclusions before you buy any policy. Or do they?

"They will say 'here is the policy. Look at the detail' and they will provide a simplified version in the key facts document," the FSA says. So to assume you a covered against your flights being cancelled really is to make ass of u and me. What weak regulation.


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Defaqto
BIBA
FSA