Opinion: Government has left holidaymakers in a protection void

Opinion: Government has left holidaymakers in a protection void

Noel Josephides, managing director, Sunvil HolidaysIn 1990 Aito decided to create the Aito Trust, a government-approved body to work in much the same way as the CAA and Abta in monitoring member accounts and setting primary bonds.

Aito Trust predated the 1992 Package Travel Regulations because many of our members, who did not wish to become members of Abta because they did not sell through agents, wanted to reassure their clients that they could proved full financial protection. 

Those were the days when travel companies were either tour operators or travel agents and everyone knew where they stood. The arrival of the no-frills carriers and the widespread use of the internet changed all that. 

However, what really changed and destroyed the harmony in the relationship between tour operators and travel agents was Abta's decision to take on the CAA over the selling of components and whether these created a package. 

In my opinion, there is only one satisfactory method of providing consumer financial protection: the provision of a tour operator bond for non-licensable turnover via an approved financial institution, lodged with an independent government-approved body such as Aito or Abta.

If a tour operator provides a bond which is held by a government-approved body then that bond is called at the discretion of that body - no ifs, no buts. The customer will either be repatriated at the end of the holiday or refunded any monies paid to the travel provider.

Should a financial institution decide that it does not want to issue a bond to a company then that company cannot trade.

If that bond was subsequently called by the government-approved body, the money would have to be paid out in order to safeguard the consumer, regardless of whether the bonded company had behaved dishonestly, given wrong information or withheld relevant information. All perfectly simple, very effective and very much fit for purpose.

Now, of course, we have a free for all. When is a tour operator not a tour operator, and what exactly is a travel agent? As the old models have broken down, so we now have a plethora of methods for providing financial protection. 

I will not comment on trust accounts in general, although I believe that the Travel Trust Association provides an excellent form of financial protection. Nor will I comment on the trust account arrangements that Travel Counsellors and now Abta have in place, which are sophisticated and effective.

Per-person tour operator failure policies are another matter, however. Now that these are in widespread use, their wording has to be looked at very carefully. The insurance companies that issue these policies may not necessarily research the background of the companies they are insuring because there is a loophole in the wording of section 19 of the Package Travel Regulations.

Quite simply, if the insurer discovers that the travel organiser has filled in its original application form incorrectly, or has forgotten accidentally or on purpose to disclose pertinent facts, it can simply cancel the policy.

This leaves the insured person - the holidaymaker, in other words - high and dry with no protection at all. And that is exactly what AmTrust did in the case of Skiing Europe.

As an insurer, why would you bother to research the travel organiser if you know you can walk away from any liability? If I were government, I would be embarrassed to know that I have given approval to what is now known to be a flawed consumer financial protection system and to insist, even now, that this system is perfectly fair to the consumer.

Aito has now written to the three main providers of per person tour operator failure insurance - IPP, HCCI and Travel and General Insurance Company Plc - and has asked all three to confirm that they would not behave in the same way as AmTrust has done. We await their response.

Noel Josephides is a leading Aito member and an Abta director. He is managing director of Sunvil Holidays.

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