The sharp rise in pay-outs for illness on holiday may end when new limits on legal costs come into effect before the summer.
The travel industry reports a seven-fold increase in claims in three years — while actual incidents of sickness reported by customers in resorts have either remained stable or declined.
Claims began to surge in 2013 after legal fees for personal injury claims which occurred in the UK were capped. The claims industry found a loophole: falling ill abroad. With legal costs often way in excess of the amount claimed, they began targeting customers who had taken an overseas all-inclusive package holiday or cruise.
In a case with an award for £5,000 in damages, costs can amount to £25,000. Because of the high cost of defending claims, many pay-outs have been made for flimsy claims with little evidence.
The apparent ease with which cash could be extracted from holiday firms further fuelled the claims industry, with touts in resorts signing up holidaymakers and, in the UK, cold calls seeking to drum up business.
By 2016, claims were coming in at a rate of 100 per day. Travel firms said costs had climbed to £240m in a year and warned that prices would have to rise to cover the cost of claims.
Some Spanish hoteliers threatened to ban British holidaymakers rather than risk becoming the target of fake claims.
Now, the Ministry of Justice is to rush out new rules fixing the legal costs that can be claimed in package holiday sickness cases. Costs will be calculated according to the value of the claim and length of proceedings, making defence costs predictable.
The rules will come into effect in the coming weeks, ensuring the curbs will be in place before the next summer holiday season.
The justice minister, Rory Stewart, said: “Claiming compensation for being sick on holiday, when you haven’t been, is fraud.
“This behaviour also tarnishes the reputation of British people abroad. That is why we are introducing measures to crack down on those who engage in this dishonest practice.”
Other reforms to be implemented shortly include a ban on cold calling and tougher regulation of claims management companies.
In the past six months, travel firms have been fighting back. Private prosecutions brought by Thomas Cook, TUI and Red Sea Holidays have resulted in four couples either being sentenced or ordered to pay significant legal costs by the court after making false package holiday sickness claims.
In October 2017, Deborah Briton and Paul Roberts from Merseyside, were jailed at Liverpool Crown Court for making fraudulent claims against Thomas Cook..
In addition, Jet 2 Holidays deployed private investigators to Spain to uncover touts seeking to persuade holidaymakers to make false claims.
The firm’s chief executive, Steve Heapy, said: “In some quarters Britain has been referred to as the ‘fake sick man of Europe’, and a cure for this sickness has now been found.
“We have fought hard to ensure that European resorts continue to offer the best value all-inclusive packages for British travellers, and we are delighted to hear that the government is on the side of holidaymakers too.”
The chief executive of the ABTA travel association, Mark Tanzer, said: “Closing the legal loophole before the summer should lead to a reduction in the number of false claims.
“We encourage the government to keep this matter under review and continue to pursue a ban on cold calling by claims management companies in relation to sickness claims.”
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