News: Lost baggage crisis could lead to higher insurance premiums

Flights > News > # 1443 (23/08/2007)

Holidaymakers could face increased insurance premiums to cover the cost of compensating passengers for the soaring number of lost bags, analysts have warned.
Insurers are bracing themselves for a wave of claims following the baggage problem that has engulfed the aviation industry and Heathrow airport in particular.
Norwich Union has seen a 40 per cent rise in baggage claims in the first six months of the year, while Insureandgo has experienced an 85 per cent rise.
Figures from the Association of European Airlines showed that British Airways was losing more bags than any other airline, with more than 300,000 failing to appear on the baggage belt between April and June.
Even worse news is expected when the next batch of figures is produced covering the height of the summer holiday season.
A spokesman for the Association of British Insurers (ABI) said there could be an impact on premiums if there is a big increase in claims. He added: "Should individual companies see a significant rise they will have to look long and hard at their prices."
The hope for holidaymakers is that companies hold off pushing up premiums in what has become an increasingly competitive market.
Although insurers can claim up to £800 per passenger from the airlines under the Montreal Convention, getting the money back is expensive.
Perry Wilson, the managing director of Insureandgo, said if holidaymakers wanted to avoid premiums going up they should pursue the airlines rather than claiming on their policies.
The prospect of premiums going up alarmed the main consumer watchdog, the Air Transport Users' Council. "We would be disappointed if companies used this as an excuse to put up the cost of premiums," a spokesman said.
Ryanair has unveiled proposals for risk-assessed consumer travel insurance policies that would provide travellers opting for the most reliable airlines with discounts.
The no-frills carrier has written to the ABI calling on the organisation to introduce cover that is based on airline performance.
Ryanair spokesman, Peter Sherrard, said: "For years, the car insurance industry has provided discounts for low risk categories such as women drivers and the over-thirties.
"The time has now come for passengers flying with airlines that deliver the best customer service to enjoy the same discounts."