Bolt-on travel insurance to become regulated

18 December 2007

Travel agents and holiday firms that sell insurance alongside holidays are to become regulated in order to offer better protection to customers.

Stand-alone travel insurance that is unconnected to any travel arrangement is already regulated by the Financial Services Authority. But the Treasury now says that plans sold alongside a holiday by flight operators, holiday companies and travel agents will also come under the FSA’s remit from 1 January 2008.

Kitty Ussher, economic secretary to the Treasury, says: "Travel insurance is a relatively complex product and things do sometimes go wrong during the sale process.

“Extending FSA regulation to cover the sale of all travel insurance, and providing consumer access to the Financial Ombudsman Service, means that if something does go wrong, consumers will be protected.”

The Treasury says 21 million consumers purchase travel insurance each year, in a market worth £670 million in 2006, with travel insurance sold by travel agents and tour operators accounting for around a quarter of sales.

There has been concern in the past that firms selling policies bolted-on to holidays do not offer a full sales process, meaning customers that, for example, have alternative insurance products that protect their possessions when away from home can effectively pay twice for the same cover.

Richard Mason, director of insurance at, says the move means that consumers who wish to make a complaint about the firm that sold them travel insurance will be able to do through the Financial Ombudsman Service.

In addition, if they purchase travel insurance alongside a holiday they will be entitled to received a letter explaining the suitability of the product and a key facts illustration outlining the product details.

However, he warns regulation is unlikely to make insurance policies sold alongside holidays any more competitive.

Mason says: “These policies can cost up to 10 times more than stand-alone policies – and the price will stay high even after regulation.

“People assume that just because they found the most competitive flight or holiday then the insurance will also be the most competitive. But bolt-on insurance products rarely tend to offer a better deal.”

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