Treasury to investigate travel insurance sales

A probe in the sale of travel insurance is to be launched by the Treasury with a warning that new legislation may be needed if widespread mis-selling is discovered.

One option could be to require tougher self-regulation by the travel industry. Another may be to include it under the regulatory control of the Financial Services Authority.

A consultation process is to start in the autumn, taking in travel agents, trade bodies, insurers, consumers associations and consumers.

The Treasury was quoted as saying the government was “prepared to introduce new regulation if there is evidence of widespread problems in the selling of these products, which cannot be adequately dealt with by self-regulation.”

The travel insurance industry is estimated to be worth £650 million this year with more than 20 million people taking out cover, the Treasury says. But policies can vary in price by more than £200 for similar levels of protection.

The travel industry led by ABTA successfully lobbied against regulation following last probe into the sector in 2003, saying travel agents’ own rules were providing adequate consumer protection.

Announcing the new probe, treasury minister for regulation of financial services Ed Balls was quoted by the BBC as saying the first step would be to talk to the industry to collect information.

He reportedly said: “Our investigation will ask whether it’s fair to put all the pressure on ordinary families to read the small print and ask the right questions to make sure they are properly covered.

“It will ask whether the travel industry should be doing more to ensure families are not left high and dry on their holidays and whether we need to strengthen regulation to protect them.” 

He added: “Millions of British families have worked hard all year to pay for their summmer holidays and are hoping they pass off without a hitch.

“But thousands of holidaymakers will suffer cancelled flights, lost valuables, and even medical problems.” 

ABTA introduced compulsory exams for agency staff on selling travel insurance following the last probe and 30,000 staff have either sat these or will sit them.

An ABTA spokesman said the association would provide a “robust” reponse to the Treasury.

“We believe there is no need for further regulation, ” he said. “The number of complaints is really small.”

He added that it was “bizarre” that the travel industry should be targeted when other insurance sellers such as the Post Office, supermarkets and direct by telephone were escaping the Treasury’s probe. He said travel agencies offered a calm environement to dicsuss insurance policies, unlike other non-travel outlets.

The spokesman also called for non-ABTA travel companies who sell insurance to ensure all their staff are properly trained.    

Consumer watchdog Which? last month advised against buying travel insurance from travel agents because they failed to follow basic selling procedures following a mystery shopper exercise (TravelMole, July 5). 

Report by Phil Davies