Travel agent conflict troubles insurers

Biba is poised to reveal research it has commissioned from pollster Populus to show there is consumer detriment when insurance is sold by travel agents.

Last month, The Treasury announced it would review how travel agents and tour operators sold cover and indeed, if regulation by the FSA or another body should be imposed. Currently, it is hearing evidence from various parties and Biba is making sure its voice is one of the loudest.

The Populus research is the trade body's latest tactic in its battle to convince the government that regulation must be imposed on the sector. Biba's technical services manager Graeme Trudgill says: "Early feedback we have seen shows detriment exists. There is insufficient advice being given in areas like pre-existing conditions and hazardous pursuits. Some people are paying too much for worthless insurance."

Powerful organisation
He adds that at times, taking on ABTA, the travel industry's trade body, has been like David and Goliath.

"It is a powerful organisation that has strong connections and haslobbied hard to remain outside of regulation. But, we are getting the message across and it is the government's duty to take action."

Apart from allegedly providing a poor level of advice, the travel industry is also accused of selling insurance at "rip off prices". Biba has also spoken out that many policies exclude terrorism and have high excesses.

Perry Wilson, director of specialist intermediary Insure and Go comments: "There are examples where an agent would quote £180 for a family while we would charge £70 for the same cover. It is ridiculous that this sector is not regulated, although I would personally like to see travel agents banned from selling cover altogether."

He explains that regulation will be a tough, if not impossible, task for the FSA. "You have people sitting in a travel agent who are only interested in their holiday. There is no recording and this is too challenging to monitor - the FSA also does not have enough manpower."

ABTA meanwhile recently gave evidence to the Treasury Select Committee, stating that self regulation works well.

It stated its own finding showed the evidence for misselling of travel insurance by its members "is very small and the subsequent detriment to consumers negligible".

But, ABTA may well have found the tide is starting to turn following a recent Which? report which claimed travel agents were dunces at selling cover.

Mystery shopping
In its mystery shopping exercise, none pointed out exclusions, while two thirds failed to ask about medical histories. Which? also emphasised that those with complaints cannot go to the Financial Ombudsman Service if they want compensation.

But, it is notable that some travel insurers are keeping their own counsel on whether travel agents should be regulated. AXA which is the largest in the industry and provides polices for Thomson, for example, was unable to provide a spokesperson. Others were happy to talk, but on this issue, sat on the fence.

Europ Assistance also provides such insurance - Mark Warner is one client - but its sales and marketing director Rob Upton says: "We are confident that the Treasury will look objectively at what is in the best interests of the consumer and the UK travelling public as a whole."

And Paul Chaplin, underwriting director for Fortis, which again supplies cover for some travel agents states: "We will of course contribute if required through the ABI. But, we would say we are hoping for a fair outcome, although would not want to see choice restricted."

Wilson comments: "Some insurers would be hard done by if travel agents had to pull out of the market. The agents are making high commissions - far more than they do on holidays - but I would say the insurers are probably making around a 20% commission on this business too. This is why they aren't speaking out more."

But, Trudgill adds: "I would not say that insurers are profiteering - the issue is with the agents who simply don't have understanding or training to sell the cover."

Indeed, insurers who provide cover for agents argue that they are meeting their obligations in underwriting fair products. Despite its complexities, travel cover is a mass market commoditised product with a high claims ratio - it needs to be sold in volume if any profits are to be made. This is a ruthlessly competitive sector with insurers competing hard to supply the major contracts. For most, this is of far greater importance than regulation.

Chaplin explains: "You get some very big claims and medical inflation is always higher than normal inflation. We provide insurance for a number of big brands including the Post Office. The issue for these clients is brand protection and that means getting the claims service right. It is all about getting your processes right."

Knee jerk reaction
Meanwhile, Steve Hook, director of corporate and travel for Mondial, says: "We firmly believe there should be regulation, but this looks like a knee jerk reaction from the government to the Which? report.

"It is about time, as it is clear that having two tiers of regulation in the market is having a detrimental effect. I would not blame agents however, as they have made efforts to raise standards. The government must accept responsibility for having created this situation."

Hook says that there is intense competition between insurers and the main focus for the key players is keeping their technology ahead of the rest.

"You could argue that the cover itself is too cheap which is why IT is so important. We provide cover for companies like Expedia and EasyJet, where the underwriting goes on while the customer is making their purchase online.

"You have to make sure you are continually evolving your systems. The next challenge will be to allow more claims handling to be done via the web. Because of the paperwork involved this remains difficult, but it's an area we are looking at."

And, Upton adds: "Price is undoubtedly the dominant factor with distributors seeking to maximise their margins. Some major brands are more service focused than others and will place more weight on factors such as responsiveness, flexibility and customer satisfaction while still wishing to achieve a competitive rate.

"It is sometimes difficult to balance the two and I feel that cover is too cheap."

He believes there is more scope for insurers to offer niche products and says Europ Assistance is currently working on a number of product developments, including a high net worth travel product.

"I believe we shall see some interesting developments over the next couple of years, both in the areas of product development, distribution and education.

"Personally, I hope that this is centred more on the objective of delivering what the end customer wants and needs as opposed to what can be provided at the cheapest cost."

Bloated quango
Travel regulation may well impose further cost on the market. And, one travel industry source said the current push to regulate is simply a ploy to increase the FSA's coffers.

He describes the FSA as a "bloated quango" and would simply remove choice and lead to more people failing to buy cover at all.

There are also pressures for the widespread terrorism exclusion to be removed - and on this area insurers say if they include it, then again the price of cover will be raised.

GE and Norwich Union have already reduced the amount of travel cover they provide and for existing travel insurers, there are set to be challenging times ahead, even if improving consumer protection is on the radar. IT