Club Direct is offering to pay for policyholders to sue travel agents, tour operators and airlines in a move that it says is sure to upset the travel industry.

From March 6, Club will make a provision of £25,000 for legal costs in all its travel insurance policies. Policyholders will be able to sue agents, operators and airlines if they can be held responsible for injury, serious illness or death while abroad.

The travel industry is usually excluded from legal action in the small print of travel policies. Club managing director Brent Escott said the new policy would concern travel agents and tour operators who, between them, sell about 69% of all travel insurance.

“The exclusion was originally introduced when travel agents had a stranglehold on the travel insurance market, and it's remained there ever since,” Escott said.

“It's a relic from the past and is not in the customer's interest.”

Travel agents have been losing their grip on the market since a law change in October 1999 which prevented them tying insurance to discount holidays.

Escott predicted Club's competitors would follow suit over the coming months.