The Association of British Insurers (ABI), the industry body that represents UK insurers, has criticized proposals to change the Air Travel Organiser's License (ATOL) system that gives financial protection to consumers booking holidays through tour operators.
The ABI has claimed that not only will the new proposals from the Civil Aviation Authority (CAA) to change the ATOL bonding cost consumers more, it will also cause more tour operators to fail. Nick Starling of the ABI said: The current bonding system, backed up by insurers’ expertise, serves the customer well. Why change from a proven and cost effective system to one that may lead to higher costs for customers, with the increased risk of peak season failures?
The new proposals include a consumer protection charge consisting of a GBP1 per person levy, more than the current charge under the bonding system, which would go toward the Air Travel Trust Fund. The fund has been in deficit since 1997 after a series of operator collapses in the 1990s. Mr Starling added: The CAA proposal is fundamentally flawed. The rate of the levy and time needed to build up a sufficient fund have both been under-estimated.
Tour operators are required to have the license, which guarantees consumers compensation in the event that the company collapses. Tour operators must purchase a bond in order to fund the scheme, which is backed by insurers.
However, the travel industry has undergone a revolution since the emergence of a new breed of budget airlines and internet sites allowing consumers to create their own packages – which are not ATOL protected. Tour operators are concerned that they would continue to bear greater regulatory costs than their airline competitors and consequently the government asked the CAA to consider whether the current system of bonding might be replaced.