The long running saga of whether travel agents should be regulated for selling travel insurance is about to be decided. Anita Anandarajah explains the issues

With the Treasury Travel Review results due out any day now, the travel industry is on the edge of its seat waiting for a decision that could change the landscape of travel insurance sales.

In the blue corner is the all-powerful FSA cheered on by brokers and in the red corner are travel agents and operators, ducking and weaving.

The fight has been long and drawn out, with many low blows dealt. It began when the Treasury decided in January 2003 that the travel industry's own regulations adequately covered insurance sold as part of a holiday package.

The first punch was thrown when the FSA took on the regulation of general insurance in 2005, but left travel agents out of the ring, smug that they didn't have to participate.

Broker disgruntlement set in because the match is now seen as fixed in favour of non-regulated travel intermediaries whom, brokers say, unjustifiably escape the same stringent rules as the other players.

Travel intermediaries do not have to pay annual fees to be regulated. And they certainly are not obligated to inform less inquisitive customers of exclusions in policies they sell.

The champion of broker interests is Biba which is accusing the Association of British Travel Agents (Abta) of having no teeth (not surprising after all those blows…). Graeme Trudgill, technical director at Biba, says: "Abta is irrelevant. Half the travel agents out there aren't members of Abta anyway."

Ducking the blow, an Abta spokes-person says that 80% of travel agents and 50% of tour operators are members of Abta.

"The big four operators – TUI, MyTravel, Thomas Cook and First Choice – sell 85% of package holidays and they are members of Abta too."

Biba is adamant that the Treasury should bring all sales of travel insurance within the scope of the FSA regulation to ensure adequate consumer protection.

"There should be a level playing field – consumers should be able to rely on good standards," says Trudgill.

Biba is now pushing travel agents on travel insurance terrorism exclusions.

"At the very least there should be medical expenses and repatriation included," says Trudgill.

To bolster its fight strategy, Biba has produced new research that shows that 78% of travel insurer providers surveyed have terrorism exclusion.

"In addition, 29% of these providers who do not offer terrorism cover allow a 'write-back' facility for medical expenses and repatriation.

Previous research also showed that 72% of customers who bought travel insurance from a travel agent or tour operator had not been advised whether terrorism cover was included in their policies.

Abta counters this with a single swipe: "How many direct sales agents explain it?"

New development

Although a fairly new development in insurance policies, Abta points out that already 60% of policies today include terrorism cover.

"Our members follow Foreign & Commonwealth Office (FCO) advice to the letter. We don't send customers to a destination the FCO advises against; instead we give them the option to go elsewhere or obtain a refund."

Broker InsureandGo puts the lack of information provided by travel agents down to poor training.

InsureandGo director Perry Wilson says: "Based on the insurance policy, people [intermediaries] should know what they are selling. Our policies are written in plain English and have received the Crystal Mark award [for use of plain English].

"We have to go through a training process that is audited by our underwriter, AIG, which is an FSA requirement. Travel agents are not subject to the Treating Customers Fairly principle, which all other players are."

Wilson adds: "Travel agents don't have to have their training audited. It doesn't cost money to get an underwriter to audit a training programme. It would be a step in the right direction. But it doesn't stop there – they are still playing at two different levels. Travel agents can still say what they want.

"They need to be regulated and trained regularly. If they have nothing to hide, they should go for regulation."

Fighting talk indeed.

Wilson goes on to address the problem of funding. "The biggest problem the FSA has is the lack of funds to conduct audits. It is a Treasury problem as well – it has to make the funds available.

"At least with the FSA in the picture, one can be closed down for mis-selling. "

Abta comes back fighting in Zen-like mode: "We set up the Abta travel insurance training programme in September 2005 following the Treasury's announcement that we would be exempt from regulation.

"Every one of our members who sold travel insurance had to sit a basic level 1 exam.

"Additionally, at least one personnel in each company had to sit for level 2, which is more comprehensive so if we get a customer with unusual condition there will be someone in the shop who can give extra advice," says Abta.

The training provided is a City and Guilds-registered course run by TTC Training. TTC develops training programmes for the travel industry and produces and manages examinations for major travel industry qualifications.

Expensive policies

Research from InsureandGo reveals that holidaymakers pay more for travel insurance when they buy from travel agents

The research found that the average cost of insurance for a single trip was 91.8% more when purchased from travel agents, compared with 25% by the most competitive insurers in the market.

"The common complaint is about how expensive insurance policies are. It is a market issue, not mis-selling.

"The people who conduct these surveys always go to high profile agencies, so it would appear that these policies are more expensive," says Abta.

It also points out that the survey results don't take into account the fact that some of these policies, which could be worth as much as £75, are given away for free in line with a promotional offer.

"They phone and ask: 'How much is a policy for a family of four?' But don't realise that the policy is thrown in for free with the purchase of the holiday package.

"Also, an expensive policy does not mean there is something wrong with it. It is a commercial issue."

The final decision from the Treasury will lay out one of three options in dealing with travel agents: full regulation, exemption from regulation or strengthened industry self-regulation.

Biba says the existing voluntary code is not working and is not effectively monitored and controlled.

"The dispute resolution service provided by the Financial Ombudsman Service is a positive step, but by then it is too late as matters have already gone wrong. Regulation is needed at the point of sale," Biba says in its response to the Treasury's travel insurance review earlier this year.

Abta seems willing to meet halfway should the Treasury's decision not be in its favour.

It says: "Ideally, Abta supports the full exemption as we have it now. In light of the dissatisfaction over a perceived unlevel playing field, it would be best if there were a light touch of regulation that will be less onerous for our members."

But why should travel agents have less onerous regulation for its members when everybody else has to live with regulation, onerous or not?

In reality, Abta admits it will have to be pragmatic. "If the Treasury does extend regulations to travel agents then we will take that on and establish a pragmatic and risk-based approach. For now we will continue to adopt a wait-and-see approach."

As the contenders start the final round, the insurance industry waits with cautious optimism to see whose hand the referee will raise.

If the judgment is based on a fair fight, there can be only one outcome: travel agents must be brought into the regulatory fold. Anything else is a cop out. IT