Regulation of travel policies by ABTA not acceptable, say insurers
Travel agents which sell insurance must be regulated by the FSA or two-thirds of consumers will be unprotected, the ABI has warned.
Four ABI staff are collating a response to the Treasury's consultation paper on statutory insurance regulation.
Consultation closes on 31 January.
ABI general insurance regulation manager Katharine Braddick said the ABI would lobby to have travel insurance and extended warranties included in statutory regulation by the FSA.
"One argument is that upwards of two-thirds of all travel insurance is sold as a part of a holiday package by travel agents, so most consumers would be left without protection if they are not regulated by the FSA," Braddick said.
"It also threatens the reputation of the product and there is the issue of unfair competition with insurance brokers who will be FSA regulated."
Braddick said the suggestion by the Association of British Travel Agents' (ABTA) that it should regulate travel insurance was insufficient.
"If it's worth regulating, it's worth being regulated by the FSA," she said.
"Also, ABTA doesn't represent all travel agents who sell insurance."
Braddick said it would be "inconsistent" for extended warranties, currently being investigated by the Competition Commission, to escape regulation.
The ABI has lobbied the Competition Commission for their regulation.
The ABI's regulatory team is also putting together responses to the FSA's CP159 and CP160.
Braddick said the FSA should amend the product categories in CP159. The categories put commercial products, such as creditor insurance, with personal products such as income protection.
"It's that kind of very technical issue that can have a serious impact on distribution," she said.
Braddick said the ABI feared the designation of some products as high risk in CP160 would result in a lack of protection and choice for consumers.
The FSA may require brokers of the high-risk products to take exams, which Braddick said could prompt some brokers to stop selling the products.
She said the ABI needed to be sure the FSA had chosen the correct products as high risk, because missing some out would give consumers less protection.
Unfair inducements definition not fair, says Williams
Biba has questioned the FSA's definition of unfair inducements in CP160.
Chief executive Mike Williams said stopping inducements for brokers to sell particular products could affect the way the market operated.
He said Biba would address the issue in its response to the consultation paper.
"It's a potential artificial restraint on the workings of the market," he said.
CP160 said unfair inducements offered by product providers might conflict with service to the customer by encouraging bias toward a particular product or provider.
It asked respondents to the consultation paper whether there were particular types of inducements that should be prohibited.
But Williams said ruling out inducements would be difficult.
"If an insurer decides to reduce commission on, say EL, and the rest of the market follows over a few months, as is its habit, that's fine," he said.
"However, some brokers have long standing contracts with insurers that mean the insurer cannot reduce their commission."Does that mean those brokers are suddenly accepting unfair inducement?"