This summer’s collapse of Lowcosttravelgroup has served as a costly reminder over the need for proper supplier failure insurance.
As the dust settles on the high-profile collapse of Lowcosttravelgroup, it is clear that a large number of travel agents will still be counting the cost of its failure.
Many agents will have dynamically packaged holidays using Lowcost’s four brands, which operated without ATOL protection and had as many as 140,000 bookings at the time the company went into administration in July.
Under European Travel Package Regulation the principal has an obligation to refund or to replace a customer’s holiday, those agents with Complete Supplier Cover insurance would have been covered for the original cost of the accommodation and any extra increase that may have been added as a result of prices going up.
But for those without full supplier insurance, the financial impact was significant.
Many of them may have assumed they were covered by their ATOL protection, when in fact this only covered their clients if they as the agents became insolvent.
What’s more, they couldn’t rely on ATOL’s cover because Mallorca-based Lowcostholidays withdrew from the scheme in 2013 when it moved to Spain and registered with the Balearic Islands authorities.
But there was further frustration for some agents who realised that their own supplier failure insurance did not go far enough .
This lesser type of insurance will cover the cost of a customer’s hotel if the agent has to foot the bill but not the extra amount if the hotel price has gone up.
And in the case of Lowcostholidays, which went into liquidation during peak season, there will have been many agents who were confronted with a big jump in prices, particularly after the Brexit vote caused a slump in the pound.
Unsurprisingly, the case has stirred much more interest in the value of financial protection schemes. But going forward, it has also highlighted the need for the travel and insurance industries to work in partnership to ensure that the right schemes are in place for today’s market.