Travel insurers and intermediaries risk disaster by pursuing ever-lower premiums at the cost of service and profitability, according to new chairman of the Association of Travel Insurance Intermediaries (ATII), Jonathan Buttery.

Speaking at the annual ATII cocktail party, Buttery warned colleagues the price war was driving both capacity and customers from the market.

He said: "This may seem a strange thing for a broker to be saying and I do not want to knock fair competition in an open market, but constant focus only on the cheapest possible price can only be the route to disaster."

The number of "serious players" underwriting the travel insurance market could now be counted on the fingers of two hands, according to Buttery. And the problem is not just in setting premium levels, but also in using small print to dodge claims.

He said: "As we nit-pick more and more to avoid paying claims, so the buying public's perception of our industry goes ever downward."