Financial Protection For Air Travellers-Follow Up (HC 636-i) Transport Committee 2 Nov 2005

Q33 Mr. Eric Martlew: Thank you, Minister and Sir Roy. I was not a Member of the original Committee and I suspect that my experiences of the last year would have changed my mind - experiences with the insurance companies when my constituency had a massive flood where 3,000 homes were flooded. This particular problem is that a lot of people buy insurance but they do not realise they are not covered. The answer must be to get the insurance companies to actually cover this particular risk. What is happening at the present time with some of my constituents, and some of everybody else's, is that they would have actually insured against this risk and what this is doing is asking them to pay twice. In fact, if they paid through a credit card the right insurance they may be paying three times. This seems very unfair on those. Surely the answer is that instead of 10 per cent of the insurance companies selling this policy, 90 or more per cent of them should be selling this policy. Perhaps we should have the ABI in front of us today to ask why they are mis-selling policies. There will always be cases of an individual who decides not to insure. All of us have car insurance, and unfortunately I took the decision that the first £150 of any damage I would pay myself; last year it cost me £300 because I had two accidents, but that is a positive choice I take. The other thing from the experience I had with my constituents is that there will be some people who are so desperate and could not afford to get back that the Government will have to intervene. When people's houses were flooded and structural damage was done, at the end of the day, after a lot of argument and a lot of debate about whether they should have been insured or not, the Government had to pay for a few people to have their houses repaired. Will there always be a case where the Government will come in and assist where there is desperation, as apparently was the situation in Mexico where we had to fly them out from the hurricane?

Ms Buck: I always think in these things, never say "never". It is hard to speculate on particular circumstances but I suppose there are always particular sets of circumstances where it is possible that someone will have to intervene at the bottom line. I think you made two important points. One is the point that the levy did run the risk of a proportion of travellers actually paying up to three times for the same cover. The second point is about insurance. It is absolutely true, and I am not going to argue, that the proportion of passengers taking out insurance that covers a scheduled airline failure is currently quite low. I do not know and it would be speculation to say: "Why is that?" I will invite myself to speculate a little bit: it may be because that is on the back of ATOL and the fact that the industry has not quite caught up with the fact that ATOL did cover. However, that figure is actually already changing. There are entrants into the insurance market - the Post Office travel insurance scheme, for example, and Airmiles - that are increasing that degree of protection. So clearly the direction is as you say; we need to see what we can do to encourage the insurance sector to improve their schedule flight cover. One of the things I would like to do, and intend to do, is to talk to colleagues in the DTI about the way in which that message can be put over. However, there will always be people who choose not to take out cover. Even on the EUjet experience, there were a third of passengers, according to the survey, who knew they were not covered. For some of those it was a difficult and painful lesson, but I am struck by one figure in the EUjet response, which is that only 1 per cent of those surveyed said they would think twice about taking a low-cost airline flight again. So although it was a horrible experience for those people, and I would not wish on anybody any form of disaster for which you are not covered, nonetheless it was in a proportion which did not make people feel: "Oh my God, I am never going to set foot on one of these flights again".

Q34 Mr. Eric Martlew: You mentioned the DTI. Has your department had discussions with the insurance companies? That would have seemed sensible before you came before us because that, obviously, is the solution.

Ms Buck: It has not been done yet, partly because the insurance sector is a kind of DTI area. However, in that relatively short time since taking the decision and going through the Civil Aviation Bill and having meetings with the airlines - because the first priority was to talk to the airlines about some of the measures that they could take, which are set out here ----

Q35 Mr. Eric Martlew: You are saying it will be done?

Ms Buck: I am saying I will make sure that it is flagged up within the DTI to see if there is a way forward in that area as well.

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Q82 Mr. Eric Martlew: On the recent collapse, did the British Government have to assist anybody to return home?

Ms Webber: In the EUjet case?

Q83 Mr. Eric Martlew: Yes.

Ms Webber: No.

Mr. Eric Martlew: So everybody had to scrape the money together or whatever and the Government did not have to assist in this case?

Chairman: No, that was the evidence, but in fact every family paid a minimum of £100.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB