<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Tino:
I'm asking this at FlyerTalk because I can't get a response from PrivilegeFlyer (which in itself is not reassuring).
Who ultimately is insuring PrivilegeFlyer?</font>
A very good question. One that the Wall Street Journal asked today, and received no answer.
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Frequent Fliers Worry They May
Lose Miles if Airlines Go Belly Up
By JANE COSTELLO
THE WALL STREET JOURNAL ONLINE
Business travelers who wait patiently at airport security checkpoints have a new topic to ponder while passing the time in line: the safety of their frequent-flier miles.
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But some fliers would rather pay for the privilege of playing it safe.
David Morse, a consultant from Los Angeles, has a total of 2.4 million frequent-flier miles spread among the programs offered by AMR Corp.'s American Airlines, UAL Corp.'s United and British Airways PLC. But after the terrorist attacks, Mr. Morse became concerned that his miles might be in jeopardy if one of the larger airlines were to fail.
To safeguard his miles, Mr. Morse spent more than $400 to buy a two-year mileage protection policy from PrivilegeFlyer, a service offered by FlightPlan Inc., a Colorado Springs-based company owned in part by the editor of InsideFlyer magazine, Randy Petersen. Mr. Morse signed up for services that would enable him to claim free travel in the event his miles either expired or became worthless.
"I honestly felt there could be some undesired consolidation in the industry," he says. "On a pure retail level, these miles represent thousands of dollars worth of value. I had thought about purchasing insurance before, but I never really worried about it until now."
Risky Safeguard?
Those who do decide to check out Mr. Petersen's PrivilegeFlyer service should be aware of the fact that what he's selling is mileage protection, not insurance. Mr. Petersen says that the company has bought insurance for its business from brokers in London, and says that FlightPlan would file a claim in the event an airline's frequent-flier miles became worthless.
Experts point out that FlightPlan's PrivilegeFlyer doesn't offer the same guarantees associated with traditional insurance policies. In the event a major airline were to fail, PrivilegeFlyer customers would have little recourse should FlightPlan be unable to pay out.
"Consumers lack the protections that exist for licensed insurers," says Robert Hoyt, professor of risk management and insurance at the University of Georgia. "There is no state insurance regular tasked with overseeing operations, no state guaranty fund available if the 'insurer' doesn't have the resources to pay, and no regulation of the price charged."
Indeed, Mr. Petersen refused to identify the companies that underwrite FlightPlan's miles-protection program, though he says his company is still paying claims to customers who lost their miles when Midway Airlines shut down in 1991.
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The entire
WSJ Online article.
Ms. Costello also provides quotes from Tim Winship, the editor of Frequentflier.com, who is not overly sanguine on the prospects of exisitng FF accounts being acquired and maintained by the surviving airlines.