ABTA is “seriously concerned” it could lose its Financial Services Authority exemption to regulate sales of travel insurance following a damning report by MPs.
A cross-party Treasury Select Committee concluded the FSA should regulate the entire travel insurance market, including sales by agents and operators. Its verdict is likely to be taken into consideration by the Treasury, currently reviewing travel insurance sales. ABTA won an exemption in 2005.
ABTA head of finance Mike Monk said: “This does not bode well for the decision the Treasury is going to come to. It does not fill me with optimism that the Treasury will come out in favour of the status quo.”
The committee argued consumers were at risk of being sold policies that do not meet their needs, and highlighted lack of awareness of exclusions relating to terrorist acts and pre-existing medical conditions including pregnancy. It added problems would be worsened if sold through agents outside regulation.
But Monk stressed exclusions on terrorism were unrelated to the trade’s ability to regulate sales. “Bringing agents and operators under FSA regulation will not change whether terrorism is covered in policies,” he said.
The Treasury is expected to reveal its conclusion in the next two months.
Some travel companies have already switched to FSA regulation. Hoseasons became FSA regulated in January 2005, while Thomas Cook is in the process of switching.
Hoseasons chief executive Richard Carrick said: “We decided we would be better off under the FSA and we are able to tell customers they don’t have to worry.”
If ABTA loses its exemption it is likely to create an FSA appointed representatives scheme to avoid members having to pay FSA costs. Advantage has already launched a similar scheme. Monk warned it could mean far fewer holidaymakers covered by insurance because members would drop out of FSA regulation.
- Discussion:Travel insurance: ABTA or the FSA? on the Travel Weekly forums