The government is to look into the mis-selling of travel insurance sold alongside holidays. It's about time, as these policies are complete rip-offs.
The Economic Secretary to the Treasury, Ed Balls MP, today announced an inquiry into the sale of travel insurance bought alongside package holidays.
Many holidaymakers are amazed to discover that insurance sold by travel agents and tour operators is not governed by the strict rules on the selling of general insurance laid down by the Financial Services Authority (FSA).
If you buy travel insurance direct from an insurer, or via an insurance broker or other registered intermediary (a "stand alone" policy), then you enjoy the full protection of FSA regulation. However, buy your policy from a travel agent or tour operator, and you get no such reassurance. Instead, you're forced to rely on the travel industry's own self-regulation, which is little better than no regulation at all!
We Brits love our holidays: according to the Office for National Statistics, UK residents made over 64 million visits abroad in 2004, and spent £30 billion on them. Two-thirds of these visits were holidays, of which half were package holidays. In other words, we took over 21 million package holidays in 2004 alone!
What's more, HM Treasury reckons that sales of travel insurance will reach £670 million in 2006, with more than twenty million policies sold each year. Roughly half of all policies sold in 2004 were arranged by travel agents or tour operators, making them the biggest providers of travel insurance. Unfortunately, these firms are also the worst culprits for mis-selling this cover, and for charging extortionate premiums!
Alas, many holidaymakers and travellers are let down by their policies when they need them most -- at the time they come to make a claim. The problem is that providers tend to sell first and ask questions later, which means that many customers are sold inadequate or inappropriate cover, but only find out when their claims (for example, for cancelled flights, lost valuables or medical treatment) are turned down.
Hence, Ed Balls (the minister responsible for regulation of financial services) is to examine this market to ascertain how widespread these mis-selling problems are. If Balls finds evidence of widespread neglect of consumers' rights, then he may recommend new legislation to bring travel companies to heel. The consultation process will be launched in the early autumn, with the Treasury inviting comment from all parties involved in this business, including consumers, so feel free to have your say!
It's been said in the past that travel agents make more money from selling travel insurance than they do from selling package holidays. This doesn't surprise me, as travel insurance from travel agents and tour operators can be three, five, even ten times as expensive as Best Buy policies! If you'd like solid protection at a great price, read Don't Trip Up When You Travel and The Secret Of Cheap Travel Insurance, then visit our new, improved Insurance centre for a quality quote!
Finally, by not introducing a tougher regulatory framework for travel insurance when it last scrutinised the industry back in 2003, the government gifted four more years of fun to travel agents and tour operators. Let's let's hope that, this time around, an inquiry produces some positive changes, and isn't just another "Balls"-up!
More: Get quality quotes for travel insurance, car insurance and home insurance | Twenty Tips To Save On Holidays.