Industry unites to condemn Treasury over FSA travel insurance plan

The insurance industry is incensed at the Treasury ruling that travel agents who sell travel insurance as part of a holiday package will avoid regulation until at least 2007.

Under the ruling, travel insurance sold through brokers or directly by insurers will be regulated by the FSA, but travel insurance sold by travel agents will avoid regulation.

Biba chief executive Mike Williams said he was "amazed" by the decision, which ABI head of general insurance John Parker said was bad news for more than 12 million consumers who buy travel insurance through travel agents and tour operators each year.

"Excluding these sales from regulation will lead to confusion for customers and a two-tier system of regulation," Parker said. "There will also be higher compliance costs for regulated providers, so encouraging unregulated sales."

But John Bibby, managing director of Primary Insurance Group, which sells travel cover both direct and through intermediaries including travel agents, said the FSA faces a big enough task regulating the rest of the insurance industry.

He said prohibiting travel agents from selling insurance would increase the number of uninsured travellers.

Treasury chief secretary Paul Boateng said the Treasury found "no evidence of systemic mis-selling" of travel insurance sold as part of a package.

"Any benefits of regulation would be substantially outweighed by the cost of implementation," Boateng said.

But, he said that "in light of some concerns raised" the decision would be revisited in 2007.

The Treasury deferred its decision on the regulation of extended warranties until after publication of a Competition Commission report later this year.

It also announced that it will consult about giving the Financial Services Ombudsman powers to handle consumer complaints from January 14, 2005 that refer to insurance sold prior to the introduction of regulation.

  • Read a full opinion from Primary's John Bibby on regulation of travel agents on