Lufthansa, the German airline, is the latest travel company to offer a refund for inclement weather while travellers are abroad. They’re the first airline to offer this, previously this type of weather risk deal has only been offered by tour operators and companies offering accommodation.
So, essentially weather refund deals like this are designed to attract customers by offering to pay out to them if the weather is bad whilst they are away. Companies offering these deals typically have a policy of their own to back up these payments, often underwritten by weather derivatives some way up the chain of cover, as obviously they wouldn’t want to make a loss on these refunds. In Lufthansa’s case they are charging customers to buy this policy so they may actually be putting the full premium burden on the customer. Other weather refund deals from tour operators and the like are included in the price, which is easier to do on a larger purchase.
Should it rain while you are away on your trip, which will be determined by German weather website www.wetteronline.de if they record rainfall of at least 5mm per day, then policyholders will be eligible for a payment of 20 Euros per day up to a max of 200 Euros. The offer is available to 36 cities, not purely beach resorts, which is surprising as with cities like New York included there’ a good chance of payout. Flights must leave Germany between September 1st and October 31st, two months when rain is likely historically. Customers are said to be readily snapping up flights, which given the above is unsurprising.
One aspect that let’s this deal down (although I can see why it’s a condition) is that customers have to claim for their rain days and Lufthansa will then check the rain measurements in their city visited on the dates travelled to determine payment. Given the technology at the disposal of the weather forecasting, insurance and aviation industries we’d expect customers to automatically receive payment so this just seems a little lazy to us. I’m sure that will also work in Lufthansa’s (and the underwriters) favour though as some customers are bound to neglect to make their claims.
The Lufthansa deal has been underwritten by German insurer Wüba Insurance AG.
We’ve written a lot about weather refund promotions on Artemis, you can find previous articles here.
View all of our Artemis Live video interviews and subscribe to our podcast.
All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.
Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.
