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Law360, London (March 24, 2020, 11:16 AM GMT ) Travel insurers in Britain could be hit with a bill of at least £275 million ($323 million) in claims over the coronavirus outbreak, the highest pay-out on record for passenger flight cancellations, a trade body for the industry said on Tuesday.
The Association of British Insurers said the amount is more than the £62 million paid out in 2010 after a volcano erupted in Iceland. The Eyjafjallajökull explosion created a huge ash cloud, which caused major disruption to flights across Europe and pushed cancellation claims for that year to £148 million, a record at the time.
That translates into an expected 400,000 claims solely over the virus in the first quarter of 2020, compared to 294,000 cancellation claims for the whole of 2010.
Insurers face increasing criticism as they withdraw from product lines ranging from travel insurance to income protection. Event cancellation policies being sold now have exclusions over coronavirus.
"At this unprecedented time, travel insurers are helping soften the financial blow for thousands of customers whose travel plans have been canceled or disrupted by coronavirus," Mark Shepherd, the ABI's head of general insurance policy, said
"Along with compensation from sources, such as airlines and credit card providers, travel insurers are helping customers get through these tough times."
LV was the first insurer to stop the sale of new travel insurance policies, followed by Admiral, Direct Line, Churchill, Aviva and Zurich.
Direct Line said the number of claims it had received on policies had risen from £1 million to £5 million in less than two weeks since the start of the month.
Insurance consultancy Mactavish said last week that major investment losses could affect the willingness of insurers to pay out on claims. The Financial Conduct Authority warned insurers on Thursday that they must treat customers fairly.
"We would not expect to see a customer's ability to claim affected by circumstances over which they have little control," Christopher Woolard, interim chief executive of the FCA, said.
--Editing by Ed Harris.
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