Insurance tips follow travel firm collapse

By KARYN SCHERER

The collapse of an Auckland-based adventure travel company has brought warnings for would-be travellers to be extremely careful when buying travel insurance.

Several people who booked holidays through travel wholesaler Sun Travel have been told they may have to pay twice, because their insurance does not cover the possibility of a wholesaler collapsing.

Up to 500 travellers are believed to have had their plans thrown into disarray by the collapse.

The company was placed in voluntary liquidation last week, with debts of $2.6 million. Around half the amount is owed to travellers who have paid for holidays, while the rest is owed to international travel operators and local suppliers.

Rival travel company Go International yesterday struck a deal to take over the 24-year-old business, and take on around 20 staff who have been left without jobs.

However, it is still unclear how many travellers will have to pay twice for holidays booked through Sun Travel.

Liquidator Graeme McDonald said yesterday that those not sure about their situation should check with their travel agent, or the Travel Agents Association. However, it was likely any payout to creditors would be minimal.

While most travellers would be protected by insurance or a fund managed by the Travel Agents Association, it appeared some policies, including those sold by health insurer Southern Cross and some credit card companies, did not include coverage for third party collapse.

Mr McDonald said he found it "almost unbelievable" that some policies did not cover such situations. "Although it doesn't happen very often, it's the obvious thing to insure for."

One large creditor, Parnell travel shop Adventure Travel, backed his warning, saying the case proved the importance of taking advice from travel agents on which insurance to buy.

Among those affected by the collapse are a group of 14 New Zealanders travelling in South America, and another group of 18 who are due to leave for a tour next week.

One of the country's largest travel insurers, Mike Henry Insurance, has been able to help 10 of the people in South America, but the situation of the other four is unclear.

Spokesman Steve Nichols said the insurer expected to pay out around $800,000 as a result of the collapse.

"It's rocked the travel industry to its roots really because it was pretty well established and the last one that anyone expected to go to the wall."

The chief executive of the Travel Agents Association, Peter Lowry, stressed that most of those affected by the collapse would not be forced to pay twice. He said he also understood Southern Cross was rethinking its policy in the wake of the collapse.

Mr Lowry said it was too early to say how much money the association would have to fork out, but it was likely to be a large claim.



Mr McDonald said it appeared the company had been hit hard by the weak New Zealand dollar, a particularly competitive industry and bad investments.

Herald inquiries have also revealed signs that the company was rethinking its future.

In March, it changed its name to International Steel Form and Construction, only to change it back to Sun Travel a few weeks later.

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