Travel and travel insurance in a credit crunch crisis

Published: 22 October 2008

Travel and travel Insurance in a credit crunch crisis
The travel industry is another area that has been hit hard by the credit crunch. However many experts also believe that fraudulent travel insurance claims are on the rise. Fraudulent claims have increased by 80%, with customers claiming expensive personal items such as iPods and iPhones have been stolen.

The Association of British Insurers (ABTA) confirmed that there had been an increase in fraud:
“People look at ways of raising what they believe is easy money”.

Of course such incidents simply push the cost of travel insurance up further. It is now also estimated that around 20% of all Britons who go on holiday do not purchase travel insurance cover before they leave. Most recently the credit crunch has provided a serious setback for most travel insurance companies, with most people seeing it as a luxury and not a necessity. Indeed, the UKs third biggest package holiday group ceased to trade.

The facts remain that travel and travel insurance in times of recession, tend to take less priority. With other factors such as unstable fuel prices and the freezing up of the global credit markets it is looking bleak for the travel companies. With hundreds of travellers now regularly stranded due to another company going bust, people are waiting in anticipation to discover if their travel insurance can sufficiently protect them. If the travel insurance is too light, then people are financially penalised when the businesses fail. However, if commercial insurance schemes are too expensive then customers cannot afford this, and may end up not taking out any travel insurance at all.
Some travellers are now taking it a stage further, never mind the insurance, some realise that they cannot afford holidays booked earlier in the year and so are pretending to be ill and obtaining sickness certificates from the doctor. Most travel insurance policies offer cancellation refunds due to sickness, on a sliding scale and travellers are taking advantage of this. The ABI's Malcolm Tarling says that insurance companies are now primed to spot "tell-tale signs" of false claims: "I won't say what those are though," he adds.
The impact of all this can now be seen by the insurance company’s response. Claimants can now expect forensic type inspection of ownership with insurers now demanding receipts or evidence of purchase, such as bank statements. Insurance Company staff are now being trained to detect nervy type responses from claimants, with the insurer now more likely to send an investigator to interview the claimant face to face.

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