Trade bodies have decided to back travel insurance regulation by the FSA but opinions were at odds for some time
Travel agents who sell insurance alongside a holiday will be regulated by the FSA, said the Treasury this week.
The recent decision by the government was preceded by months of debate over the level of regulation required.
According to the Treasury, around 20m people buy travel insurance every year and many are at risk of being sold policies which do not meet their needs.
In response, economic secretary Ed Balls called for evidence to be presented to the government on whether statutory regulation should be introduced into the sector.
Opinions on the subject were at odds.
Early on in the debate, the Institute of Insurance Brokers (IIB) called for a distinction between advice-driven and “non-advised” sales of travel insurance.
“It is right that customers should have the same level of consumer protection, regardless of how they buy their travel insurance. But the new regime must benefit consumers, and avoid adding costs in a competitive market.
Nick Starling, the ABI’s director of general insurance and health
It said this would allow travel agents' exemption from regulation to continue, as long as they made it clear to consumers that they were selling the product without any advice.
A month later, Biba published research which revealed that 97% of consumers wanted the government to protect them from travel agents who failed to explain the full details of their travel insurance policies.
In the research, Biba expressed concerns that some travel agents failed to advise of policy excess or how to make a complaint.
Consumer group Which? also waded into the debate when it made public research that showed consumers were being mis-sold travel insurance.
The ABI and the Association of British Travel Agents (ABTA), however, rejected calls for a crackdown on the travel sector.
The ABI called on the government to introduce light touch regulation through trading standards as FSA regulation was too burdensome.
“We wholeheartedly welcome the Treasury’s proposals for the regulation of the travel insurance industry.
Eric Galbraith, Biba chief executive
The UK travel insurance market was highly competitive and there was only a low risk of customers getting the wrong deal, it said.
But research from InsureandGo found that on average the cost of insurance for a single trip cost 91.8% more from travel agents compared with the 25% most competitive insurers in the market, and 15.5% more than the market average.
ABTA argued that more consumers would travel abroad without travel insurance if FSA regulation was introduced.
The trade association added that it was effective at regulating its members on the sale of travel insurance through its Code of Conduct.
The most recent move by the Treasury has been welcomed by Biba chief executive Eric Galbraith: "We wholeheartedly welcome the Treasury’s proposals for the regulation of the travel insurance industry.”
After the treasury made its decision, the ABI chose to back the move.
Nick Starling, the ABI’s director of general insurance and health, said: “It is right that customers should have the same level of consumer protection, regardless of how they buy their travel insurance. But the new regime must benefit consumers, and avoid adding costs in a competitive market.”
