With only six months to go before travel agents have to become FSA-compliant, Jane Archer finds out what options retailers will have if they wish to continue selling travel insurance

There is just over six months to go before we hit the deadline for all travel insurance to come under Financial Services Authority regulation, at which time agents must be either FSA members or formal representatives of intermediaries if they want to continue selling insurance policies.

The trade could be forgiven for thinking the issue of regulation has gone very quiet since the Treasury decided last year that agents had to be regulated by the FSA rather than ABTA.

In fact, at the end of last year the FSA released a consultation document on how it will operate – its final policy paper is expected at the end of this month – prompting a lot of work behind the scenes, with ABTA playing a key role in trying to persuade the Treasury that a light touch is required for its members because travel insurance is not their core product.

ABTA has objected to the cost to agents of joining the FSA and requested more guidance about its training and competence regime. It is also concerned about proposed rules to protect client money. It said the FSA should simply require agents to pay premiums to intermediaries within 30 days.

In his submission to the FSA, head of policy and communications David Marshall said: “We’ve asked the FSA to compare the fee to be an ABTA member with the fees proposed – in our view the level of fees will act as a disincentive to authorisation.”

The FSA wants agents to pay the same as other insurance intermediaries. This means a £1,500 application fee and a quarterly charge of between £128 and £1,100, with the total dependent on how much agents earn from travel insurance sales. There is a 30% early-application discount.

Meanwhile, insurance intermediaries have been updating their systems to cope with the expected influx of retailers who want to work under their FSA licences rather than go through the hassle of joining the authority.

Under the new regime, agents can become either an appointed representative (AR) of their travel insurance provider or an introducer appointed representative (IAR).

As an AR, agents can sell travel insurance under the licence of an FSA-regulated insurance intermediary. As an IAR, they can only pass on information, including a contact number, about their insurance provider.

Preferential managing director Steve Nickerson said: “The idea of an IAR is that the customer then purchases their travel insurance direct from the provider, but it is possible that some sort of commission process will be available as, essentially, the agent is passing on business.”

In its consultation document, the FSA predicted 200 travel firms will join the authority and fewer than 200 will become ARs because insurers and intermediaries may be unwilling to take on large numbers due to the extra costs and risks involved.

Worldchoice director Helen Burgess said some consortia members have already been appointed ARs of Covermore, and Thomas Cook has gained AR status with AXA, but most providers are waiting for the FSA’s policy document before finalising arrangements.

Journeys Travel Insurance managing director Patrick Chong said about 180 agents have asked to become ARs, but said there is no point tying them into a contract now when that contract might have to be changed.

He said priority will be given to agents who sell Journeys’ travel insurance, but other agents can apply, although they will take longer to process.

He said: “We will have to carry out risk assessments and look at their insurance sales. They must also be properly trained as they are selling under my licence, so we will be putting a dedicated trainer on the road.”

Citybond Suretravel group broking director Greg Lawson said: “Many agents expect to become ARs and maintain the status quo. In reality, we expect only 25%-30% of the travel trade will be offered AR status in time for the January 1 deadline.”

He said Citybond Suretravel will require its ARs to have ongoing staff training on compliance and insurance, and appoint an approved person at director level who will have compliance responsibility for insurance sales.

Timeline: new travel insurance rules

  • June 26 2007: The Treasury decides agents selling travel insurance must be regulated by the Financial Services Authority.
  • December 2007: FSA consultation paper issued.
  • March 18 2008: Deadline for responses.
  • May 2008: FSA policy paper explaining final rules and regulations expected.
  • June 30 2008: FSA will begin accepting applications for membership.
  • September 2008: Deadline for 30% early application discount.
  • November 15: Deadline for agents to have joined the FSA.
  • January 1 2009: Travel insurance sales by agents come under the FSA. From this date, agents must either have obtained FSA authorisation or be an AR to sell travel insurance.