Correct, if the T&Cs say insurance is required then it is a legally binding clause in the contract.
BUT, the TO can't insist that you buy their insurance. You can get it elsewhere and they will either ask for details or just get you to tick the box saying you have it. And as you say, if you haven't and it all goes wrong the TO can quite righty wash their hands of you.
As in, if you want to book yourself a holiday it is not illegal to travel without insurance. As we know, many european holidaymakers don't bother with it as they perceive that the card that replaced the E111 is sufficient.
Anyway, this was about groups and TOs so carry on.......
About 10 Koreans, none of whom spoke any European language, accompanied by a translator/guide who seemed to have been paid to look after them but was busy on her phone.
One bloke with a case that must have weighed 30 kilos got to the front of the queue and when they tried to Excess him the guide announced that the group would like to pool their luggage allowances - despite the fact that 5 had already checked in, 2 at a different desk! The supervisor took a very deep breath, gave them a look that could curdle milk at 100 metres and then made them all wait at the back until everyone else was done!
This highlights a serious point, if you are in a group stay together in the same queue, don't wander off using your phones (they do work if you stand still!). The "Lead name" should lead and if you want to pool luggage allowances say so at the start.
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