This post is your essential introduction to financial failure insurance for tour operators. We will discuss what financial failure insurance is, how it works, and what it covers. We will also explore how you can ensure that you are fully covered for financial failure, and other risks.
For more information about your insurance obligations as a travel agent or tour operator, be sure to check our dedicated travel insurance hub.
What is Financial Failure Insurance?
Financial failure insurance is specialist cover for tour operators and travel agents. It provides a cost effective means of meeting your insolvency protection obligations, so you can comply with your ABTA or PTR requirements to put measures in place to protect their customers’ money in the event that your business ceases trading.
As part of their membership of the Association of British Travel Agents (ABTA), travel agents and tour operators have certain obligations concerning insolvency protection. The UK Package Travel Regulations (PTR) imposes similar obligations.
How Does Financial Failure Insurance Work?
In the unlikely event that you cease trading, you may not be able to refund customers for tours and packages they have previously booked with you. Financial failure insurance can provide your customers with a cash settlement, meaning that your customers will not lose any money.
This arrangement can also free up some cash flow for you, which may help your business to manage through periods of economic uncertainty.
Financial failure insurance works like any other policy, in that you pay a premium for your cover, either upfront or on a monthly basis. The premium you pay will vary depending on the nature of your business, the types of tours and packages you offer, and your risk level as a travel agent or tour operator.
Do I Need Financial Failure Insurance?
Under the 2018 Package Travel and Linked Travel Arrangement Legislations, it is against the law to sell travel packages without an appropriate level of insolvency protection in place. You can meet the requirements through entering into bonding arrangements as part of your ABTA membership. However, it can be a lot more cost-effective to instead invest in bespoke financial failure insurance cover.
How Much Does Financial Failure Insurance Cost?
If you purchase a financial failure insurance policy, the premium will be calculated based on your unique requirements and risk-profile. This means that you can expect exactly the level of cover you need at a price that meets your budget.
Dedicated financial failure insurance also provides greater peace of mind for your customers. If your customers know that their money will be safe, no matter what happens to your business, then they may be more likely to book with you.
How To Ensure You Are Fully Covered For Financial Failure, and Other Risks
The best way to ensure you are fully covered for all the risks you will face as a tour operator is through working with an insurance specialist who understands how you work, and what you need.
At James Hallam, we have provided dedicated insurance services for tour operators and travel agents for over 20 years. We have a thorough understanding of the unique risks businesses face in the fast-moving travel industry.
We will take the time to understand your business so we can tailor the best possible travel and tour insurance programme for you and your customers. This can include financial failure insurance, yet we will also advise on other insurance policies you may need to get truly comprehensive cover at the best price.
Find out more about our specialist travel industry insurance services.