ABI opposes changes to holiday protection scheme

by Gill Montia

Story link: ABI opposes changes to holiday protection scheme

The Association of British Insurers (ABI) has expressed dismay at the government’s plans to replace the Air Travel Organisers’ Licensing (ATOL) protection scheme with a £1 levy on holidays.

ATOL is a scheme set up to protect consumers in the event of their tour operator ceasing to trade.

It is administered by the Civil Aviation Authority (CAA) which carries out checks on the tour operators and travel organisers it licenses.

Participating tour operators are required to lodge a financial guarantee with the CAA, so that if they go out of business, the CAA can make refunds or arrange for those already on holiday to finish their vacation and be flown home.

In response to the changes being proposed by the Secretary of State for Transport, Nick Starling, the ABI’s director of general insurance and health, said: “We are disappointed with the decision to replace a highly effective private sector scheme, with what amounts to nationalising a functioning market. This will have a grave impact on business, and the timescale for implementation is irresponsible”.

Mr Starling believes that the current system of guarantees creates an incentive for tour operators to trade responsibly because the cost of their bond is calculated according to the risk the tour operator presents.

However, a flat levy system will provide no such an incentive and the fee of £1 per passenger could prove insufficient.

In this case, additional costs may have to be met by the taxpayer.