News & Events

Insurers brace for spike in ash claims.

Source: The Globe And Mail - May 3, 2010

The volcanic ash from Eyjafjallajokull has settled, but for travel insurance companies, the fallout is just beginning.

The country’s largest travel insurers, Manulife Financial Corp. and the insurance unit of, are bracing for a flurry of claims stemming from the eruption of the volcano in Iceland that grounded European flights and snarled air traffic for days. Executives at both companies say this will be one of the most significant events for the travel insurance sector since the 9/11 terrorist attacks.

And they have a warning for those planning to fly to Europe in the months ahead: If the volcano erupts again,travel insurance won’t cover you if you’re stranded.

“Trip cancellation is designed to cover unforeseen events,” said Rob Iafrate, assistant vice-president of travel insurance at Manulife Affinity Markets. “Right now, they’re still suggesting that there’s opportunity for that volcano or the sister volcano to erupt. From our point of view, it’s no longer an unforeseen event.”

RBC, the largest provider of travel insurance in the country, is adopting a similar stance. “The industry has come out and made it clear that, as it relates to Icelandic volcanoes and anything that may go on there for an indefinite period of time … in your insurance contract that would not be covered,” said Tim Bzowey, vice-president of travel insurance at RBC Insurance.

Travellers usually have at least a few months to submit their claims on policies they’ve purchased to cover trip cancellations or interruptions. For a variety of reasons, insurers suspect that most of those stranded by last month’s eruption have not begun submitting their claims yet. Some policy holders whose coverage comes through their benefits at work might not even be aware they have coverage, for instance.

“They’re starting to trickle in slowly, but we would assume in the next couple of weeks to really see the influx,” Mr. Iafrate said.

Manulife, the second-largest provider based on premiums, has been analyzing the number of policy holders that might have been affected based on what it knew of their destinations and believes it could be in the thousands, he said.

The Co-operators Group Ltd. said late last week that it had received one notice of an upcoming claim related to the volcano, from a group planning to do a European tour. “We do expect to get others, but it sometimes takes people a while to send them in, especially under difficult circumstances,” said spokesman Leonard Sharman. TD Insurance, a Toronto-Dominion Bank unit, had not yet received any claims late last week.

The impact for Canadian insurers would have been much larger if the disruption occurred in July, Mr. Iafrate noted. “April is just the start of the European season, so that’s very beneficial from an industry point of view.”

Manulife notes that in order to file a claim for trip cancellation or interruption, policy holders require unused tickets, original receipts for new tickets purchased and original receipts for travel arrangements paid in advance.