If you buy travel insurance from a travel insurer, insurance intermediary, or anyone else who sells insurance as their business, they are subject to strict rules and regulations controlled by the Financial Services Authority.
If you buy your travel insurance from a travel agent as part of the travel package, the travel agent is not regulated in the same way.
There is a heated debate as to whether or not the government should force travel agents to be regulated in exactly the same way as almost every other type of business that sells any type of insurance.
The debate is heightened by the current investigation into the subject by HM Treasury.
Around 20 million travel insurance policies were sold in 2006, of which around a quarter were issued by travel agents and tour operators. Travel insurance covers a variety of situations including the cost of medical cover, cancellation of travel plans and replacing lost or stolen items.
The Association of British Insurers (ABI) is the trade association for Britain’s insurance industry. Its 400 member companies provide over 94% of the insurance business in the UK. It represents insurance companies to the Government, and to the regulatory and other agencies, and is an influential voice on public policy.
The ABI suggests that a light touch reform of travel insurance sales would give added protection to over 4.5 million customers who buy from tour operators and travel agents.
In its response to the review by HM Treasury of travel insurance, the ABI proposes that:
- The Financial Ombudsman Service is extended to cover customer disputes arising from travel insurance sold as part of travel package arrangements.
- Local authority trading standards regulate the selling of travel insurance sold through tour operators and travel agents, similar to the way they monitor extended warranty sales.
- There should be an industry Code of Practice to ensure best practice.
Jane Milne, the ABI’s Head of Property and Travel Insurance, says: “The UK travel insurance market is highly competitive. Travel agents are in effect unregulated. Our proposals will ensure that everyone buying travel insurance enjoys the proper level of protection, while also maintaining a thriving market.”
According to research by the British Insurance Brokers' Association (Biba), some 97 per cent of consumers want the government to protect them from travel agents who do not explain the details of their travel insurance policies.
The study, conducted by Populus, also revealed that 72 per cent of consumers who had bought travel insurance from travel agents recently were not advised on whether terrorism cover was included as part of their travel insurance policy.
Biba chief executive Eric Galbraith says: "Travel insurance is vital when we jet off on our holidays and it is the role of the provider to ensure that consumers are both fully covered and understand the limits of their policies."
The study also reported that only 44 per cent of travel agents and tour operators explain to tourists how to make a claim, compared to 69 per cent of travel insurance brokers.
Not surprisingly, a body that disagrees with the ABI and Biba is the Association of British Travel Agents (ABTA).
Regulation from bodies such as the Financial Services Association (FSA) makes providing travel insurance more difficult, particularly for smaller travel agents, according to ABTA.
The group is saying that if the government brings in more FSA regulation then many travel operators would be forced to stop selling travel insurance, which would reduce choice for consumers.
Mike Monk, head of financial services at ABTA says: "When customers book a holiday, it is logical for them to buy travel insurance at the same time, as this provides instant protection, if they need to cancel. Travel companies can offer the holidaymaker the best advice on their travel insurance needs as they have just sold them their holiday."
In a statement, ABTA said there was a "total lack of evidence" for the mis-selling of travel insurance.
While not taking sides on who is right we would like to point out that
- With over 600 providers offering thousands of different travel insurance policies in the UK, losing a few small travel agents is not going to reduce consumer choice
- The travel insurance offered by travel agents may be suitable for most travellers, but often does not protect those who are old, with health problems, or undertaking riskier pursuits
- Travel agents rarely get complaints as most claims are dealt with direct by travel insurers or specialist travel claims companies acting for them
- Care has to be taken who ever you buy a policy from
- There is an increasing range of specialist providers and special polices for those who by reason of health, age or activity, need a special policy
Travel insurance: Hot Topic: February 2007
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