When Thomas Cook, a global travel organization based out of the UK, ceased operations on September 23, 2019, thousands of travelers were affected by the news. The situation is certainly unusual, and while it came as a sudden surprise for many travelers, the financial challenges of the company were not unknown to the market. For some time before the news became official, the company was providing progress updates on their efforts to recapitalize the company. In the absence of a recapitalization, the outcome was inevitable.
How Can Travel Insurance Cover This Situation?
While we believe travelers based in Europe will be most affected, where some support is underway on a country-specific basis, there are likely U.S. travelers who also will feel the sting of this announcement. Those who are impacted, and who had purchased travel insurance, may be confused about what is, and what is not, covered.
Typically, the bankruptcy or financial default protection found in travel insurance policies only relates to the bankruptcy or financial insolvency of the travel supplier, such as an airline, cruise-line, hotel or tour operator, and not the financial insolvency or bankruptcy of the travel agent or intermediary agent.
In this particular case, coverage is a bit more complicated since Thomas Cook is the travel agent but also had its own airlines, hotels and resorts. Therefore, travelers with travel insurance who booked flights or hotels on a Thomas Cook owned airline or hotel may have recourse if their plans included supplier financial insolvency coverage.
With that said, travel insurance plans that provide coverage for financial default or insolvency of a travel supplier (other than an agency) do have some purchase requirements to be aware of. These requirements can include purchasing the plan within a set time frame of the initial trip payment date (7-14 days typically) and that the bankruptcy or insolvency of the supplier must occur 15 days or more after the travel insurance is purchased.
Those who booked tours or other flights and hotels through Thomas Cook, yet outside of Thomas Cook brands, are likely not covered.
For anyone who is affected and has purchased travel insurance, we recommend you get in touch with your provider immediately to determine next steps, and to get the process started on reimbursement if an option.
Is There a Way to Avoid a Situation Like This in the Future?
The answer is yes, to some degree.
For U.S. travelers, knowing the background of who they’re dealing with when making any type of travel purchase is paramount. It’s unlikely that the largest traditional travel agencies such as Carlson Wagonlit and American Express are at risk of sudden closure. Likewise, there’s a low risk of the online travel agencies such as Expedia or Priceline going under. For smaller travel agencies, it’s important to know the organization’s background and level of stability.
For concerned travelers who want to cover all the bases, travel insurance can provide some measure of coverage. Many travel insurance plans will provide for cancellation protection should an airline, cruise company, or hotel become insolvent. Purchasing travel directly from a supplier, and not through a travel agent, will give travelers the ability to purchase travel insurance from TravelInsurance.com with coverage for a supplier’s financial insolvency. Travel insurance won’t provide coverage in the event a travel agent goes out of business.
For those who want the most flexibility, consumers can consider a travel insurance plan with a Cancel for Any Reason (CFAR) option. A CFAR upgrade allows the insured to cancel their trip for any reason. CFAR is typically only available as an option at the time the policy is purchased and requires the traveler to insure 100% of their pre-paid, non-refundable trip costs. And importantly, the traveler must purchases the policy within a set number of days (usually 7-21 days) of their initial trip payment date. With CFAR, either 50% or 75% of the trip costs will be reimbursed, depending on the plan selected.