Financial protection for air holidays is to be extended: Is there still a need for travel insurance with insolvency cover?

By , February 16, 2012 11:42 am
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Article Summary: We’re discussing what the ATOL reforms mean in practice for UK holiday makers and whether there is still any need to buy travel insurance with insolvency cover.

The Government is reforming the ATOL (Air Travel Operators License) Protection Scheme with effect from April this year. This is great news for travellers as it will mean more holidays are financially protected and it makes the whole system clearer and easier to understand.

The level of financial protection you have for your holiday if a supplier becomes insolvent depends largely on how you booked it, which in turn means that how you booked your holiday will also have an impact on what level of travel insurance cover you should buy. Travel insurance cover for insolvency can be called a number of different things, from something simple like ‘Insolvency Cover’ to ‘Scheduled Airline Failure’, which isn’t usually limited to the insolvency of airlines as the name suggests, or Dynamic Packaging Cover which probably means very little to anyone outside of the insurance or travel industry.

Quick check diagram - do you need insolvency cover with your travel insurance? This diagram reflects the current situation and will be updated once the reforms come into effect

Read our previous post for more information about the current financial protection available for your holiday and how that effects the travel insurance need.
Note:This will change from April 30 2012.

ATOL Protection extended to cover Flight Plus Holidays from April 30

From April 30, the Government is extending the ATOL Protection Scheme to include what is sometimes known as a Flight Plus holiday or Dynamic Packaging.

This means that from April 30, if you book a flight plus accommodation, or a flight plus car hire abroad from a high street or online retailer, your booking will be ATOL Protected.

Under the current ATOL regulations holidays that included a flight and hotel that were chosen and priced separately, even if they were booked through a single company, were not covered. Under the new rules which come in to effect in April this type of holiday will get the same kind of protection as a traditional package holiday. Great news for holiday makers.

The financial protection that the license brings will add a £2.50 per person ATOL Protection Contribution (APC) to the cost of your booking. And from October you should receive a certificate to confirm that your booking is ATOL Protected. (The travel industry has been given until October to start issuing certificates because of the amount of work involved in updating their systems to be able to do this).

Aviation Minister Theresa Villiers said

“It is essential the scheme should apply in an effective way in the modern holiday market; so that consumers are clear about their rights and how to use them, and holiday companies know which of their products must be protected.

“In addition the Air Travel Trust Fund needs to return to a financially self-sustaining basis as soon as possible so that taxpayers’ money is no longer exposed to risk. We expect these reforms should allow the ATOL scheme’s financial deficit to be repaid within three years. This will pave the way for possible future changes to improve how the scheme is funded and managed.”

Holidays and Flights Sold by Airlines will still be Excluded from ATOL

There is one important omission from the new regulations, and that is that holidays and flights sold by airlines. You won’t get the same level of protection if you book a flight and hotel ‘package’ direct through an airline, such as Easyjet or British Airways, as you would choosing the same flights and hotel via a third party such as or a high street travel agent.

The extending of the ATOL Protection Scheme to Flight Plus and Dynamic Packaging holidays is a significant step forward in bringing ATOL up to date and in line with our changing ways of booking holidays. However extending it further to include holidays sold by airlines is essential if UK holiday makers are to get clear and fair financial protection for their holidays.

Although the Government has stated that it is committed to extending ATOL Licensing to include holidays sold by airlines, it would require a change in the law so is not included in the latest set of reforms.

Is There Still a Need for Travel Insurance with Insolvency Cover?

So the question is, with the extension of the ATOL Scheme coming in to force in April, will there still be a need for Travel Insurance with Insolvency Cover?

The simple answer to that is yes, definitely.
Travel insurance with insolvency cover will still be able to plug a gap in the financial protection provided by the ATOL Scheme.

For instance, holidays or flights sold by an airline will still be excluded from the ATOL scheme, so if you book a flight and hotel from an airline rather than from a high street or online retailer your holiday would not be financially protected.

Also if you were to book flights and accommodation separately through 2 completely separate companies, for example booking your flights with Expedia and your hotel through, your holiday would not be protected under the new ATOL rules because you have not booked the flight and accommodation together.

In these instances your holiday would not be ATOL Protected and travel insurance with cover for insolvency can provide the financial protection against the loss of money you have invested in your holiday.

In short the Government’s reforms will extend the ATOL Scheme to protect more holidays than it did before, however it still only provides protection for if you book your flights and accommodation or flights and car hire from the same campany, and it still excludes flights or holidays sold by an airline completely. This means there are still many instances where travel insurance with insolvency cover is a good option to provide cover against the risk of your airline or holiday supplier becoming insolvent.

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