AITO discovers 'enormous loophole' in Package Travel Regulations
AITO is temporarily suspending its 100% financial guarantee from August 1 following the discovery of an "enormous loophole" in the Package Travel Regulations.
The loophole is in relation to Tour Operator Failure insurance and has come to light following a police investigation into Devon-based schools ski operator Skiing Europe, which was an AITO member for nine months until it resigned earlier this year.
Devon and Cornwall police began an inquiry into Skiing Europe in March after the company cancelled several school ski holidays or forced schools to cancel at the last minute, leaving thousands of students out of pocket.
AITO had been taking legal advice following the investigation and had hoped to be able to fight to ensure all schools were refunded the money they had lost.
But in a statement today it announced that Amtrust Europe, which it had understood had been insuring Skiing Europe for several years, has cancelled the policy it issued to Chris Reynard, a sole trader who operated as Skiing Europe.
"This move has belatedly left many thousands of school children without the financial protection their schools and AITO believed they had, in the event that Chris Reynard is unable to meet their claims due to his insolvency," AITO explained.
"AmTrust Europe's position is that they are entitled to cancel Skiing Europe's financial protection policy as a result of material non-disclosure by Chris Reynard when applying for this insurance.
"AITO is disappointed that, following legal advice to the association, it appears Amtrust Europe is not prevented from so doing by Regulation 19 of the Package Travel Regulations which sets out the legal requirements applicable to these policies.
"We believe that this is a very serious shortcoming in terms of the insolvency protection provided to consumers by the Package Travel Regulations."
AITO said it believes that per person financial protection insurance policies which give the insurer the right to cancel the policy after bookings with the consumer have been made are not fit for purpose in providing financial security for the consumer.
It currently has 23 members with such policies.
AITO chairman Derek Moore said: "This case throws into question the viability of a great many insurance policies which are currently in use in the travel industry.
"AITO thus calls on Government and the industry in general to look very closely at policy wordings so that such an unfortunate situation, denying consumers the cover for which they have paid, cannot occur in the future."
AITO said it hoped the suspension of its 100% financial guarantee would only be temporary.
It said it would continue to find a way of helping all those school children affected including those who booked prior to Skiing Europe becoming a member of AITO.
It urged schools and other organisations which booked whilst Skiing Europe was a member of AITO, between June 8 2010 to March 10 2011, to contact the association.
With permission from Travelmole
Protection fiasco Q&A
TravelMole put some questions to AITO spokeswoman Sue Ockwell in light of yesterday's revelations of the protection loophole. Here's what she had to say:
Q. What advice has AITO given to its 23 members with such policies?
A. AITO is asking these members to look at alternative methods of financial protection. In the meantime AITO lawyers are writing to the insurers of those members asking them if they will guarantee that they will always honour refunds to clients should the AITO member in question fail. If an insurer so guarantees then members can continue to offer financial protection in this way.
Q. Does this have implications for other tour operators - ie non AITO members?"¨
A. Yes. We have no idea how many companies have per person tour operator failure policies but there must be many hundreds out there.
Q. Why has this loophole not come to light before?
A. We believe that there have been instances before but AITO has not come across them. This case is, in a way, a perfect storm scenario - economic crisis, the withdrawal of credit by banks, big group bookings and children involved."¨
Q. What is AITO going to do next?
A. AITO is trying to assess the size of the problem which is difficult because the company in question is no longer an AITO member. We are liaising with police and trading standards. AITO will continue to talk to BIS and other Government departments. We believe very strongly that Government action is required to sort this out. This is not something a trade association can do alone. We've been shocked that it is apparently bad drafting of the PTRs that have brought this problem about.
Q. What would need to change for AITO to bring back its 100% financial guarantee?
A. Either all members need to be bonded or insurance companies have to offer guarantees that they will not renege on the cover that has been bought on consumers' behalf.
Q. What are the implications for AITO members who are covered in other ways (ie not relying on this kind of insurance)?
A. Members continue to offer their own financial guarantees.
Q. How are AITO and its members making customers aware of this change? And do you think customers will understand it?
A. Members with insurance cover are having to over-sticker their brochures, change their websites, brief their staff and AITO is having to change its quality charter and website. We doubt that customers will understand this as it is so complex. We doubt many in the travel industry will understand let alone their customers. This is something the travel industry has to sort out with Government and insurance providers.
With permission from Travelmole
TravelMole put some questions to AITO spokeswoman Sue Ockwell in light of yesterday's revelations of the protection loophole. Here's what she had to say:
Q. What advice has AITO given to its 23 members with such policies?
A. AITO is asking these members to look at alternative methods of financial protection. In the meantime AITO lawyers are writing to the insurers of those members asking them if they will guarantee that they will always honour refunds to clients should the AITO member in question fail. If an insurer so guarantees then members can continue to offer financial protection in this way.
Q. Does this have implications for other tour operators - ie non AITO members?"¨
A. Yes. We have no idea how many companies have per person tour operator failure policies but there must be many hundreds out there.
Q. Why has this loophole not come to light before?
A. We believe that there have been instances before but AITO has not come across them. This case is, in a way, a perfect storm scenario - economic crisis, the withdrawal of credit by banks, big group bookings and children involved."¨
Q. What is AITO going to do next?
A. AITO is trying to assess the size of the problem which is difficult because the company in question is no longer an AITO member. We are liaising with police and trading standards. AITO will continue to talk to BIS and other Government departments. We believe very strongly that Government action is required to sort this out. This is not something a trade association can do alone. We've been shocked that it is apparently bad drafting of the PTRs that have brought this problem about.
Q. What would need to change for AITO to bring back its 100% financial guarantee?
A. Either all members need to be bonded or insurance companies have to offer guarantees that they will not renege on the cover that has been bought on consumers' behalf.
Q. What are the implications for AITO members who are covered in other ways (ie not relying on this kind of insurance)?
A. Members continue to offer their own financial guarantees.
Q. How are AITO and its members making customers aware of this change? And do you think customers will understand it?
A. Members with insurance cover are having to over-sticker their brochures, change their websites, brief their staff and AITO is having to change its quality charter and website. We doubt that customers will understand this as it is so complex. We doubt many in the travel industry will understand let alone their customers. This is something the travel industry has to sort out with Government and insurance providers.
With permission from Travelmole
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