Insurance sold through travel agents or by tour operators is to be overseen by the Financial Services Authority (FSA) the government has announced.
At present only standalone insurance products are regulated by the FSA, but Ed Balls, the Economic Secretary to the Treasury, says new legislation will be in place by 2009. A consulation process will take place before then.
The Association of British Travel Agents (ABTA), which represents agents and operators, criticised the decision saying that many of its members would stop offering travel insurance due to the increased cost, putting travellers at risk.
Balls said: “Twenty million people are buying travel insurance each year, and some are putting themselves and their families at risk by buying travel insurance that may not cover their needs. This happens as consumers have a ‘knowledge gap’ when buying travel insurance, as they often do not understand what they are buying or what it covers.
“Evidence shows that companies regulated by the FSA are better at getting consumers to make an informed choice because they are better at explaining the key features and exclusions of the product and guiding the customer through the sales process.”
Travel firms will have to meet statutory requirements on treating customers fairly, and customers will have access to the Financial Ombudsman Service if things go wrong.
ABTA said it would look to take part in the consultation process as it believed there was little evidence of customers having problems under the current system.
Mark Tanzer, ABTA Chief Executive, said: “I am very disappointed that the Treasury has chosen to take this step which could lead to an increase in the number of UK holidaymakers travelling without insurance. However we will work closely with the Treasury to ensure that this new regime will minimise any negative impact and look to ways to allow the majority of our members to continue to offer this essential service.”
