The Financial Services Authority has announced plans for regulating travel insurance sold alongside holidays in a move that could see the end of some travel agencies selling insurance.

All travel companies or agencies who sell Connected Travel Insurance – policies bought with a holiday, travel tickets, accommodation or tours – will have to become regulated by the FSA.

They can apply for FSA authorisation to sell CTI from June 30 2008 and the scheme comes into force in January 2009.

If travel firms choose not to seek authorisation, they can become an “appointed representative” of an authorised firm. They can also become an “introducer“, which means referring customers to travel insurance companies by giving out leaflets or website details.

ABTA head of financial services Mike Monk said many agents would be likely to choose the “introducer” option.

He urged: “Travel agents who become introducers will have to be very careful just to recommend insurance and not to give advice, as it’s their natural desire to help the customer. Bosses will have to make sure staff are well trained.“

However, many smaller companies are likely to stop selling insurance altogether, Monksaid.“It won’t be commercially viable for some agencies to become authorised as licence fees will be involved, so they will miss out on the money to be made from insurance. This is taking money out of members’ pockets,” he added.

The Treasury announced last week that the FSA will regulate CTI. The FSA already regulates stand–alone travel insurance. A review in July concluded the current regime, which allows ABTA to regulate its members, must end in January 2009.