Government orders investigation after allegations of travel sector misselling

The prospect of travel agents and tour operators being brought under the FSA's regulatory regime moved closer this week after the government ordered an investigation into allegations of misselling of travel insurance by the sector.

The Treasury investigation was initiated after consumer group Which? complained that tour operators could not be trusted to sell appropriate cover.

Ed Balls, economic secretary to the Treasury, said: "Too many people find they are not properly covered by their travel insurance.

"Our investigation 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: "The first step will be to collect all the evidence from consumers and industry experts - and then work out what needs to be done."

It is widely believed that travel agents and tour operators were made exempt from FSA regulation after heavy lobbying from the Association of British Travel Agents (ABTA), which argued its members would not be able to meet FSA requirements.

Which? found only 35% of travel agents selling insurance asked questions on medical conditions, and only 29% explained the terms of the policy. This compared to 80% of banks, which did both.

Earlier this year Biba stepped up its campaign to have travel agents regulated by the FSA (News, 15 June). Peter Staddon, head of technical services at Biba, welcomed the

Treasury's announcement.

"We are concerned that travel operators are using undue influence to sell policies," he said. "Many of these policies are poorly sold, and there is no transparency on how much travel agents make."

Biba has requested to contribute to the investigation.

The ABI said the government investigation would coincide with the FSA's work on the regulations governing the sales of stand-alone travel policies.

Stephen Sklaroff, deputy director general of the ABI, said: "We need a balanced and proportionate system that gives all insurance customers the protection they need without adding unnecessary costs or red tape."