Insurance is not the same at all. Compensation is paid for by the carrier, creating an incentive to minimise it. If one carrier has more disruption, under your own logic they have to raise fares and become uncompetitive. That is very different from using travel insurance to dump the costs of their failure on the whole market, which is what Eurostar do here. It is clearly unfair that Eurostar can get away with this, but any airline flying the same routes cannot.
The popularity of less expensive or inflexible fares does not prove anything about travellers willingness to tolerate non-performance and dumping of responsibility by a carrier. It is one of the more outrageous trends that carriers including domestic rail will assign a zero value to an Advance fare if the customer misses the train by 1min, but will happily cancel a raft of services and refund only a fraction of the face value. If a carrier strands a passenger in any city overnight, most people would expect the carrier to pay - there we never be a demand for this as some sort of 'value added' packge.
Yes, it is.
The point of insurance as a distinct financial product is to cover you in the unlikely case you win the reverse lottery and end up owing someone huge sums of money. Since these events are rare, the most efficient thing for people to do is to pool together. A million people paying a £100 a year premium means a pot of £100m a year to pay out claims. That's enough to cover the maybe 10,000 people who have to claim back £10k a year, or 1000 people claiming £100k. The most likely events are the cheapest ones and insurance normally involves an excess, so that people don't claim for things that they could actually afford.
The main risk of running an insurance pool like this is that it will run out of money because, through sheer bad luck or extremely bad risk planning, it is having to pay out more than it receives in premiums. This risk is mitigated by spreading and diluting the risk further. Either you have to make really sure that there's no chance of a huge set of claims, or you pool further with other insurance pools in a reinsurance market. The first one is like a big home insurer having a policy to prevent them from insuring more than 10% of the properties in a street, town or area of the country in case there's a big flood or earthquake. The second one is a big thing and there are big companies like Allianz and Prudential who make it happen on a global multi-trillion dollar scale.
The other option, of course, is to increase the premiums based on individual risk. If you have a home in a flood-prone area you're going to have to declare that to your insurer and pay more. If you want to own a Range Rover in London you're probably going to be paying a lot because of the very real risk that it'll be stolen or vandalised.
For insurance the buck ultimately stops at the state level. IRA bombings meant that central London office buildings were uninsurable so the government ended up agreeing to be the insurer of last resort. For quite a bit of the world's economy, the insurer of last resort against human threats is, somewhat indirectly, the United States Department of Defense. There's no financial provider in the world who would give Big Tech companies the insurance they would need in case of PRC interference in Taiwan but the investment keeps on humming because there are B-2s and supercarrier strike groups only a few hours away.
We force people to buy insurance in certain circumstances because of the very real risk they will cause expensive negative externalities for the rest of us to deal with if they don't. Car insurance is one such striking example. No one is exempt from having car insurance because there's essentially no cap on how much damage you could theoretically cause other people as a result of your driving. All the very expensive lawyers involved in the Great Heck train crash car insurance claims summing tens of millions of pounds can attest to that. Likewise we force people to buy health insurance because we also won't refuse to treat patients in emergencies. In the UK we do that through non-hypotheticated central government taxation but the basic principle is the same in all other developed countries, including the United States.
Where does a train being cancelled fall into this? It really is on the low end of the spectrum, comparatively. The sums would only get really big if cancellations were going on for a long time - e.g. if the Channel Tunnel had an incident which forced it to be closed for months or years. Even then, the total payout would be limited to the people who had already bought tickets. Anyone who would take a refund for a cancelled future journey means the liability gets capped at that because they'd never need to worry about alternate travel or accommodation options for them any more. So in practice it's just the people already on the trains and already waiting to travel who really cause any meaningful insurance payouts.
With the risk of payout being so small it isn't at all surprising that Eurostar has just chosen to self-insure where it has. And, we haven't felt it necessary to compel passengers to possess full travel insurance for their journey, so Eurostar has ended up reducing fares by reducing the level of insurance they provide. This is all within a dynamic and competitive market for cross-Channel travel. Eurostar is competing against airlines (if it increased fares, then London-Paris flights would reappear) and other ground transport like coaches and walk-on ferries plus rail travel.
The way we've optimised ticketing for planes, trains and to a limited extent coaches and ferries is by going for yield management. The marginal cost of filling another seat on a service which runs anyway is essentially nil, so a huge amount of effort goes into making sure that all of the services are filled up even if it means offering cheap tickets. We can judge how important a journey is to someone by how much they are willing to pay for it. A business traveller on expenses will spend a lot on a ticket if that is critical for them to be where they need to be for their work. Someone trying to get home to see a family member before they die will probably shell out quite a lot of money for that opportunity. Tourists, on the other hand, normally end up wanting to spend as little as possible in order to maximise the amount of tourism they can do for their fixed budget. At the Eurostar terminals or airports you'll find a mix of all of these different passengers, and they generally won't know how much they paid vs anyone else.
If yield management results in every last seat being filled in order to maximise revenue, then there just won't be any slack when anything goes wrong. That problem of marginal and fixed costs means that any possible slack will end up being used. If there is path and traincrew and train availability for another service, then that service will probably end up being run and yield-manage filled up. So long as the additional marginal cost of that extra service can be covered by ticket revenue, it's a good idea as it'll help to spread the fixed costs of the infrastructure and company operations further and increase profitability. The more profitable the service is, the more services will be run, which in turn is what makes it possible for people to do business or family or tourist travel in the first place. People might be upset about being charged an appropriate amount for a last-minute ticket to see a dying relative, but the alternative is that the option wouldn't exist at all at any price. The lack of remaining 3.5 hour flight options from London to New York has probably meant that a few people haven't been able to do just that, but they don't grumble about something that doesn't exist.
If you have a short notice supply shortage, what is the correct strategy to rebalance demand to match? As above it's rarely easy to conjure up a like for like replacement, so that everyone who has a ticket will still be able to use it for travel that same day. Even if it were, for disruption like this it's quite probable that it wouldn't be directly comparable anyway. Running a rail replacement coach service down the M20 and onto a cross-Channel ferry and then to Lille is not the service that Eurostar offers. If you have a ticket for the 10:00 service and you need to be in central Paris for 14:00 local time then it won't actually do you any good at all. If there's no way for you to get there on time, then it might not be worth you travelling at all. If Eurostar were forced to allocate a seat on this cross-Channel rail replacement bus service for you then it would be a waste of everyone's time and resources.
Central planning doesn't work because it doesn't allow for individuals to select from their own set of trade-offs. Each and every passenger waiting for their Eurostar has their own. For many, if there's disruption on this magnitude, it would just be easier and better for them to abandon their travel. Staying another night in a hotel isn't the end of the world. For others, if the journey really is that critical, then it will make sense for them to start coming up with alternate plans. What the best alternate travel plan is really does depend on their own individual circumstances.
If there is a gap here that can be filled to improve major disruption situations then it is actually an information sharing problem. Once the Eurostar service is cancelled, it needs to be as easy as possible for people to find out what their alternate travel options really are. If hopping downstairs to the Thameslink platforms and going up to Luton or down to Gatwick for a flight to somewhere near Paris is factually possible and desirable for a traveller given their individual circumstances, then making it easy for them to find that out and buy that ticket would make life easier for everyone. If it were easy for passengers to be matched by their final destination so that some could actually work out that there's 4 people all planning to go to a little village east of Reims and they may as well do a group hire car rental, then it would make life easier for everyone. If a coach company could find out that there are 50 people all in Central London who are willing to pay for that impromptu rail replacement service, and they have a bus and driver ready, then it would make life easier for everyone.
Alternate flights and transport options being fully booked already is actually also an information problem. On that Gatwick flight to Paris there probably are a bunch of tourists who only paid £40 for their tickets. To the airline, modulo any requirements for Advance Passenger Information or no-fly lists, it doesn't really matter who fills each seat on the plane. Indeed, all they care about is that someone paid for that seat. So, if you do have a new shortage of supply, it makes a lot of sense to give existing passengers on a route the information that someone else is willing to buy their ticket off of them. If you're just planning a day trip or otherwise have a flexible itinerary, would you not seriously consider the option of selling your ticket to someone who needs it more? Indirectly this is how airlines manage overbooking today: if there are too many people booked on and turning up for a flight, the best option is to find the passengers who are happy to be compensated for giving up their ticket.
When people complain about the efforts they had to go through to get to their final destination they are actually declaring just how important that journey was to them. If they are able to make that journey, then it means the system generally worked. If it meant hiring a taxi to speed down the M20 to catch that last ferry of the day in order to see a family member before they died, then it wasn't unsuccessful. The main issue now is that fixing the problem is complex, and there are many passengers who will struggle. There isn't a magic wand to be waved here other than them coughing up for someone else to deal with the complexity for them. If you're a group of pensioners who can barely use a smartphone and you need to get to Paris by 14:00 then in all truth you should be paying someone to organise it. It's just insurance. If it all goes to plan, then the fee seems to be for nothing. If it all goes to pot, then that fee means there'd be someone sitting in a control room with a bunch of screens working out how to get you home. This is what you get when you go for a TUI package holiday given the ATOL protection.
