Travel agents seeking extra protection for themselves and their customers need to be aware of the impact of new Financial Services Authority regulations on their ability to sell supplier failure insurance, ABTA head of finance Mike Monk has warned.
Supplier failure policies are designed to plug gaps in protection for consumers and agents when a company supplying individual components of a holiday or dynamic package fails.
A number of new supplier failure products have entered the market following high-profile collapses such as XL Leisure Group in September.
So far, 80 travel companies have signed up to sell Rock Insurance Services’ Supplier Failure Cover and 150 applications are in the pipeline.
Holiday Brokers launched a similar policy in September and ABTA’s Supplier Failure Insurance launches at the end of the year.
But the new regulations, which come into force in January 2009, mean agents selling any form of travel insurance, including supplier failure products, will either need FSA authorisation, to be an appointed representative, or refer customers to authorised insurance businesses for a commission.
“People have to understand that the new regulations are not just for ordinary travel insurance – they will not be able to sell scheduled airline failure or other travel-related insurance unless they are authorised. The only exception is car hire,” said Monk.
The new rules come amid calls for a reform of the ATOL protection regime, which many believe is inadequate.
Rock Insurance consultant Lawrence Assock said: “ATOLs had never been fully tested until the collapse of XL and when they were [tested], they were more than wanting.
“At a recent World Travel Market seminar on the future of ATOLs, the general agreement was that ATOL does not work,” Assock said.
The FSA deadline to apply for authorisation to sell travel insurance from January 2009 was November 15, when just five companies had signed up. Firms may still apply for authorisation status, but they may not be able to trade policies at the beginning of the year.
● About 25 industry chiefs were due to meet the Civil Aviation Authority today to discuss financial protection before TUI Travel and Thomas Cook meeting transport secretary Geoff Hoon.