My Weblog

From January 1, 2009 some major changes will take place in the way Travel Insurance is sold. Companies which are solely in business to sell travel insurance (known as stand-alone companies) have been regulated by the Financial Services Authority (FSA) since 2005 and will not be affected.

The change will hit the companies that have been selling travel insurance as an element of a holiday package, such as travel agents, tour operators, coach companies, and airlines. Although these travel companies may already be regulated as far as selling their other travel products, there has been a double standard regarding the sale of travel insurance. In other words, the stand-alone companies have been required to be FSA regulated in order to sell travel insurance, while those selling travel insurance as part of a travel package have not. Non-regulated travel insurance has also been widely available at retail stores, supermarkets, chemists and through the Post Office. It has also been offered alongside other insurance products such as house insurance or when opening a bank account, or as part of an employee benefit package.

The debate about this matter has been going on for a while and the Treasury has been very concerned about the way travel insurance has been sold by many travel companies. As travel insurance is a complicated product compared to many other types of insurance this has led to a lot of confusion and misunderstanding among consumers. The new FSA regulations will mean that the sale of all travel insurance will be subject to its strict standards and rules.

Because of the potential harm to consumers who may not be properly advised of the policies they are purchasing, the government requested that the FSA (the UK’s financial watchdog) take over regulation of all types of travel insurance sold in the United Kingdom. The result is that after the deadline of January 1, 2009, travel insurance will only be available through FSA-regulated agents

Smaller travel agencies or tour operators may not want the bother and expense of going though the complicated and costly process of applying for and complying with FSA regulations. Therefore, they may have no choice but to refer their clients to travel insurance brokers or agents who are already FSA regulated.

The news has not been well received by many of the big package holiday operators. Many believe that their travel agents are already well trained to sell travel insurance. However, other companies may not have done such a good job in training their staff to advise customers of the actual terms and conditions of the travel insurance, for example exclusions for pre-existing conditions. There have also been concerns that when travel insurance is sold as part of a holiday package, customers may focus on the excitement of the holiday and not pay attention to the small print of the insurance they are purchasing. The Association of British Travel Agents (ABTA) has expressed concern about the prospect of its members losing income and business from the loss of travel insurance sales. They lobbied for self-regulation of the sale of travel insurance by travel agents rather than going the FSA route, but without success.

One benefit to customers under the FSA regulations will be more efficient service regarding the way they are sold travel insurance. The seller will be bound by the strict FSA principles and guidelines that customers must be treated fairly. They will also have the benefit of the services of the Financial Ombudsman should any disputes arise. One other major change, which is part of the regulation process, is the requirement for implementation of an efficient complaints handling procedure by those selling travel insurance.

It is estimated that anything from ten to fifteen percent of travellers leave home to go on trips each year without any travel insurance. This translates into millions of people travelling uninsured. Perhaps consumer confidence and awareness about the importance of travel insurance will be given a boost by the impressive footprint of the FSA!