Untapped Market: Insuring Travelers Against Airlines Going Bust

With airlines failing right and left, you’d think insurance companies would be queuing up to help passengers protect expensive travel investments should their air carriers go bust before — or even during — a holiday. You’d be wrong.

This occurred to me when I took a trip last month to Northern Ireland. I carefully read the standard travel-insurance policy and found that it didn’t guard against “financial insolvency,” my biggest fear for a $6,000 flight. After seeing a colleague eat two tickets for Aloha Airlines, I was concerned less about getting sick before the flight than I was about having the flight/airline disappear with no recourse.

Here in the U.S., however, insurance companies that offer such policies have done little to assuage travelers’ concerns. Some of the usual travel-insurance suspects claim to offer such policies, but they’re usually buried within other policies, and difficult for individuals to understand and, in some cases, to purchase.

Corporate-travel insurer Travelex, for instance, ostensibly offers such airline-failure protection policies through its Web site, but you have to hunt them down — and even then the site inexplicably fails to work if, for instance, you want any sort of detailed information about the policies. Other stalwarts such as TravelSafe, HTH Travel and AIG TravelGuard aren’t much better. Total Travel Insurance, primarily an online insurance broker, offers policies from 19 different plans, but cautions that insurance companies may deny coverage for some airlines –  especially those with significant financial problems.

Oddly enough, an almost two-decade-old British company appears to be one of the first to stake a claim to the consumer market for (justifiably) nervous fliers. According to the Guardian, International Passenger Protection, an underwriting agency founded in 1990, soon plans to offer airline-failure policies directly to the public through its Web site, ProtectMyHoliday.com. Online sales will be “available shortly” for as little as £5 per person — but only in the U.K. For now, U.S. insurance companies appear content to sit on their hands.