Insurers differ on claims over Air Australia collapse

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20 February 2012

The number of airline passengers stranded without insurance cover after the collapse of Air Australia isn’t yet known, with some travel insurers not providing financial default cover for the airline’s collapse since late last year.

More than 4000 passengers were reportedly stranded overseas by the collapse, but a number would have taken up offers by rival airlines to get them home.

There are also an unknown number of domestic passengers in Queensland, Victoria and WA affected by the collapse.

Chartis has confirmed some passengers will be covered depending on the type or level of cover.

In addition to Chartis-branded travel insurance, the company underwrites financial default cover for Real, Good2Go, Insure & Go, Kango and Defence Health.

A Chartis spokesman told insuranceNEWS.com.au the company has not yet identified how many policies it is exposed to following the collapse.

“We sell thousands of leisure travel policies every day, and a number of those provide cover for financial default,” she said.

Chartis Australian GM Leisure Travel Mark Kopec says the Air Australia collapse is classed as a “random and unforeseen” event, which means that clients holding certain leisure travel policies will be covered.

The Chartis cover will only apply to policies purchased before midnight on February 16, a few hours before Air Australia collapsed.

Chartis was one of the last companies offering financial failure cover for Air Australia. Cover-More, which is underwritten by Great Lakes, excluded this clause from December 21 last year.

The withdrawal of insolvency cover also applied to Options, STA and Travelsure policies from that date.

UK-based International Passenger Protection also withdrew financial failure cover on Air Australia policies from November 28 last year.

Chartis says it saw no reason to withdraw Air Australia cover as the airline continued to operate normally until February 17.

“We design travel insurance products so that our clients are protected in circumstances such as this one,” the spokesman said.  

“As Air Australia had been operating as normal up until February 17, we saw no reason why we should not continue to sell leisure travel policies.”

Withdrawal of cover for airlines has become almost a daily event, with Cover-More ceasing to provide travel insurance on Spanish-based Spanair and Hungarian airline Malev before they were grounded.

It also withdrew cover from Tasmanian-based regional airline Tasair before it stopped trading on February 3.