Lloyds of London Raises Premium to Reflect Monumental Risk

One of the ways premium airlines got business travelers to spend their companies' money on their higher fares was by offering generous perqs through their mileage programs. Now one of the biggest frequent flier programs looks like it's going the way of WorldCom futures.

Lloyds of London, which was insuring United's Mileage Plus through AwardGuard, raised its premia to reflect the risk. Because of this, AwardGuard can't offer its usual protection policies. Privilegeflyer.com, which offers the AwardGuard insurance that Lloyd's underwrites, is in the thick of the battle, and says that, "at least for the short term," your Mileage Plus account should go into the same drawer as your application to be an accountant for Arthur Andersen.

AwardGuard, the only such insurer in the business, can't make money by charging clients $119 a year, to insure their mileage award premia, up to a $7500 limit.

Privilegeflyer.com president Randy Petersen, talking to the Denver Rocky Mountain News reporter Heather Draper, said, "As you might imagine, the current climate of the airline industry has had an impact on every travel-related company." Like United, today; and like American, and like... tomorrow? "When MileagePlus members redeem out into other programs, United has to pay," Petersen said. "United is in no situation to owe or pay people money."

Just like your stockbroker, who urged you three years ago to 'stay with that mutual fund,' Petersen is a believer: "I still strongly encourage members to earn and hold, rather than burn miles," he added. The airlines would like that, too -- it's a debt they'll probably never have to repay.

FMI: www.ual.com