Volcano spurring millions in travel insurance claims

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With millions facing delays in air travel due to a volcanic eruption in Iceland, the industry is treating claims by stranded travelers as weather-related incidents.

United Kingdom travel insurance provider Direct Travel Insurance announced that it is covering claims from consumers either stranded abroad or those who cannot travel due to the lingering cloud of volcanic ash grounding flights.

The company said while many travel insurance companies do not cover such incidents, “in light of these extraordinary circumstances,” Direct Travel is treating the event as an “adverse weather event.” As such, customers can make a claim for travel delay, abandonment or missed departure under their policies.

“We have received calls from a lot of distraught customers,” Paul Thilo, vice president of consumer marketing for Direct Travel, said in a statement. “Some are concerned about their forthcoming holidays, while others are stranded abroad. Whilst our travel insurance does not normally cover this kind of situation, we wanted to do what we could to help those that have had their holidays affected. Unfortunately the knock-on effects of the Icelandic volcano eruption are likely to be felt long after the planes take to the skies once more.”

Direct Travel noted that claims for costs cannot be recovered from another source, including airlines, and claims will be honored for policies bought prior to April 13, when the volcano erupted.

Jim Grace, president of the U.S. Travel Insurance Association, told the New York Times that the industry is seeing claims of larger than $10 million.

“This will be a significant claims event for the insurance industry,” he told the newspaper.

The report states that about 30% of American travelers buy a range of insurance policies covering travel through cruises and flights with $1.6 billion paid in premiums every year in travel insurance.

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