Treasury probe is justified

Comment by Jeremy Skidmore (www.jeremyskidmore.com)

As we – hopefully – return to some sort of normality and more mundane subjects, I expect the Treasury to pick up where it left off before the terror alert.

The recently-announced investigation into the sale of travel insurance caused widespread anger throughout the industry. It shouldn’t, because this has been on the cards for the past couple of years and is completely justified.

Many have been complaining that the industry has been singled out for special treatment – it certainly has been, because operators and agents have been exempt from regulations that affect other businesses.

You may remember that in 2003, following lobbying by ABTA, the government made a special exception for retailers and operators, ruling that they could continue selling insurance as part of a package without coming under the regulatory control of the Financial Services Authority.

It also pledged to review that situation in the future to make sure agents and operators were behaving themselves and that is exactly what they are doing.

Of course this government, desperate to say something positive before the terror crisis, to detract from the multitude of other cock-ups over which it is currently presiding, dressed it up as a new probe to benefit holidaymakers, precisely at the time when the majority of people are packing their bags for the annual holiday.

Meanwhile, consumer watchdog Which?, which has always been unhappy about the special treatment given to agents and operators and has followed the situation closely, released its damning report into their sales tactics only a month ago. I can’t believe the timing of that was a co-incidence either.

So what is likely to happen? If the findings of Which? are generally representative, and the Treasury discovers that agents and operators are miss-selling, they’ll have no cause for complaint about being brought under the FSA’s control.

Critics claim that applying to be part of the FSA is costly – anything from £1,500 to £15,000 plus annual fees – and that many agents would simply stop selling if they were forced to sign up.

That is of no concern to the Treasury. They don’t care whether that it’s a cut-throat business with tight margins. Their priority is to ensure the consumer is not misled, and that has to be right.

Incidentally, there has been some criticism that agents are ripping people off by charging too much for their policies. In a free market, that’s nonsense. Companies should be able to charge what they like and if people don’t want to pay the price, they can find the product in plenty of other places. Mis-selling is a completely different matter.

In the past three years, ABTA has put thousands of agents through exams to try to ensure that standards are maintained in the selling of insurance – something that they didn’t have to do. Consequently, they say complaints over the sale of insurance are extremely low.

Let’s hope they’re right and agents and operators don’t get landed with an extra expense they can ill afford. But if there are any big skeletons in the cupboard, they’ll only have themselves to blame.