The issue of whether travel agents should be regulated is dominating the headlines, but insurers have stayed conspicuously silent. Steve Hook asks why
The great regulation debate rages on, but still the travel insurance sector sits in quiet contemplation, refusing to stand up and be counted. As has been highlighted in recent Insurance Times articles, the issues surrounding the regulation of the sale of travel insurance are high on the agenda for the industry.
However, the sector at the centre of the disquiet continues to show little inclination to speak out on regulation and how to move forward. As things come to a head, travel insurers will need to make their voices heard and they should be voting for a level regulatory playing field for the entire travel insurance industry.
Changes to the regulation of the sale of travel insurance were first introduced in January 2005. The government minister, Paul Boeteng, decided that a partial exemption of regulation would be permitted until mid-2007 when travel insurance is sold in connection with a flight or a holiday (known as a connected contract).
It is believed that this decision came about after intense lobbying by the Association of British Travel Agents (Abta) which felt that its members would be unable to meet the new stringent regulations when they came into effect.
This exemption effectively means that all Abta registered distributors selling travel insurance in conjunction with a holiday or flight are exempt from meeting the same stringent FSA regulations that apply to FSA regulated firms.
In other words, the rules apply to insurers and brokers when selling routine holiday travel insurance policies, but not to travel agents.
Insurers and brokers are regulated by the FSA, which means they provide advice to their clients, ensuring they are sold the right policy for their needs and make the customer aware of any important points such as disclosing pre-existing conditions.
Following the introduction of the new regulation, which applies to brokers and insurers, consumers now receive four times more documentation – such as policy wording, policy summary, demands and needs and initial disclosure – than previously when buying a policy through a regulated channel.
However, because Abta members currently do not need to comply with the same regulation, consumers receive an inconsistent level of documentation if buying through this distribution channel.
In July 2006, a Which? report into travel insurance reinforced industry concerns by uncovering some shocking examples of the sale of travel insurance by some travel agents. According to the report, in some cases this was ill advised or inappropriate for the customer's needs, and in many cases "over-priced" when compared to similar products available direct from insurers.
It is clear that two-tiered regulation is having a detrimental effect on consumers' experience and does not meet their needs or expectations. And with the mid-2007 deadline looming, the time has come for travel insurers to recognise the benefits of regulation across the board.
The time for sitting on the fence is over; the major insurers and distributors have to join the debate on the current situation regarding regulation and terms of cover. As the majority in an industry worth £650m GWP per annum, it seems ludicrous that they don't want to have their say and protect their own interests. This conspiracy of silence seems especially strange given that industry bodies such as Biba, which represents less than a 1% share of the industry, seem more than happy to put their viewpoint across.
In fact, Biba has already called for the government to impose regulation on travel agents, in a reaction to what it sees as the failure of the self regulation of travel agents. A lone voice in the wilderness, Biba is making demands for a system to ensure that consumers are afforded the same protection they receive from insurance brokers and intermediaries who are regulated by the FSA. Travel insurers should be making the same demands in order to secure a healthy market where consumers can buy with confidence.
Travel agents make valuable commission from the sale of travel insurance, but surely they too want to provide their customers with an added value product that fulfils their insurance needs.
The Which? report suggests that quality cover couldn't be further from some travel agents' minds. If consumers aren't getting the cover they expect or need, or worse still, choose to travel without any cover at all because they perceive it as being too expensive on top of the cost of flights and accommodation, this reflects extremely badly on the industry as a whole, just as it is in the throes of proving it treats customers fairly.
High security threats at UK airports seem to have become a standard part of travelling, making consumers even more aware of the need for adequate cover.
The fact that it has been publicised that many policies have blanket terrorism exclusion is an unsettling prospect for consumers, leaving them at sea as to where to turn to get the level of cover needed to ease uncertainties in today's troubled climate.
Add to this the Which? report revealing accusations of tour operators and travel agents selling expensive policies and it's clear to see why consumer confidence is shaky at best.
Despite evidence to the contrary, Abta still maintains that the system is effective and claims that it receives few complaints as an organisation.
But we all know that all travel insurance policies identify the insurer as the point of contact for complaints if a claim is declined, leaving travel agents and Abta with a clear conscience – and the industry as the fall guy.
The current exemption of travel agents from insurance regulation is having a significant impact and consumers are suffering, which is shaking their faith in travel insurance altogether.
It makes sense for the industry to support loudly, calls for a level regulatory playing field for the entire travel insurance industry. Without doubt, by creating an industry standard consumers will be able to make informed choices about the quality of their insurance cover.
Once consumers have the power to make these choices, they will gain confidence in the industry and the level of protection they are buying.
The travel and insurance markets need to work together in order to ensure consumers gain the best cover for their needs. All insurance providers want to ensure that their customers are properly covered. Regulation is the best way to do that, helping consumers know what they are buying by giving them clear and consistent information.
The key to a successful industry is ensuring consumers get the right cover, at a competitive price – something we all have a right to expect. IT
Steve Hook is director of corporate and travel at Mondial