Victoria Edwards who recently joined Crawford Legal Services in the UK as head of travel and casualty looks at the impact of Coronavirus (COVID-19) on international travel.
There are now almost 90,000 cases worldwide although the vast majority –more than 90% - remain in China. Iran, South Korea, Italy and Japan have 81% of the cases outside of China. Portugal, Iceland, Jordan, Tunisia, Armenia, Latvia, Senegal and Andorra reported their first confirmed cases on Monday 2 March 2020.
Despite the rising cases across Europe and the world generally the advice from the Foreign & Commonwealth Office (FCO) remains the same. Today, the advice is against travel to China, South Korea and 10 small towns in the Lombardy region and one town in the Venelo region of Italy. We suspect that we will see this increase in other parts of the world as the virus spreads.
Despite the advice from the FCO some businesses are advising their employees not to travel unless essential and some schools across the UK have chosen to close. It should be noted that the Government has the ability to close schools, stop public transport and stop group gatherings if they choose to under the Civil Contingencies Act, no such action is anticipated at the moment.
What does this mean for the insurance market?
We suspect that there will be a reduction of foreign travel this year as the disease spreads which has already affected the stock market.
Business interruption losses will rise if the disease spreads and businesses are unable to open their doors, with the impact then spreading further.
Potential for claims under the Package Travel and Linked Travel Regulations 2018.
Insurers will be liable to refund consumers where holidays have been booked to destinations which the FCO advises against travelling to. In addition, there will be the knock-on effect of businesses suffering monetary losses.
Should the travel industry be worried about claims?
If a consumer can prove that a tour operator is unable to perform a significant proportion of the agreed services of a holiday it must provide comparable arrangements at no extra cost. This may apply where for example a hotel is infected and alternative accommodation has to be provided. The consumer may choose to reject the proposal on the basis it is inadequate and a successful claim for compensation made.
In respect of claims being pursued by consumers who have become infected whilst on holiday, they will have to prove that the accommodation provider was aware of the outbreak but failed to quarantine. As the disease is airborne they are likely to have difficulties in proving that they did not contract it from somewhere else.
It must be noted that Air Travel Organisers' Licensing (ATOL) has advised that no compensation will be paid as it’s a major outbreak and not a failure on behalf of providers.
It would not be surprising if such claims are pursued but ultimately unsuccessful on the basis that the spread of the disease was “extraordinary circumstances” and therefore no award of compensation made. This certainly appears to be the message from ATOL.
What can insurers do?
Consistently keep up to date on the FCO advice on travel and the World Health Organisation.
Insurers could provide their customers with easily digestible advice should they wish to alleviate concerns about foreign travel and pre-booked holidays in an attempt to avoid a reduction in sales of holidays and families abandoning pre-arranged holidays.
Maintain the stance that COVID-19 is “unavoidable and extraordinary circumstances” and no compensation will be paid outside the remit of the travel insurance policies.
To find out more, please contact Victoria Edwards on Victoria.edwards@crawco.co.uk or download our report here - https://www.crawco.co.uk/resources/the-insurance-impacts-of-the-2019-novel-coronavirus
