Agents could face penalties and risk being barred from selling travel insurance under new regulations to come into force early next year.
A new independent body called the General Insurance Standards Council has been set up by the insurance industry to govern sales of policies.
From next year, all those involved in selling insurance to the public will be expected to join the new body which aims to protect customers from the mis-selling of policies.
Chief executive of the new body Chris Woodburn said agents who fail to abide by the new code will face disciplinary action.
There will be a range of penalties, from issuing a warning to fines and, finally, expulsion from the council.
“At that point Icannot see that agents will be able to continue selling travel insurance. Insurers have given GISC empowerment and they expect agents to be members or contracts will not be renewed,” he said.
Customer complaints will be one way to judge whether an agent has broken the code but this is more likely to be the role of monitors who will call on members to assess the way insurance is being sold.
Woodburn is not committed to the idea of mystery shopper-type visits but believes it is too early to rule them out.
“I don’t see us going in and kicking down doors but members need to recognise the importance of compliance,” he said.
Initially agents feared that half of the UK’s travel agents risked being barred from selling travel insurance under the new regulations. But Woodburn would not be drawn on the numbers likely to be affected.
“I was previously chief executive of the Securities and Futures Authority so I come to GISC as an independent observer. I do not know how many agents might be mis-selling travel insurance but I do not expect rules on training to bite until 2003 anyway,” he added.
He does favour the idea of some sort of visible accreditation for agents, the ABTAsticker for example, that would raise awareness of the council in the public conscience.
A nationwide roadshow aimed at consulting the insurance industry on the new regulations kicks off this week in Glasgow (see box below).
Woodburn said it is a ‘genuine consultation’ and he is committed to ensuring that everyone involved in the selling of travel insurance to the general public should be a member. And that includes the retail travel trade.
“There may be a case for travel agents as a group to apply to operate outside the GISC but as a regulator I have a problem with fragmentation. In addition, Ihave been told by consumers’ associations and the insurance industry that we need one system.”
GISC, based in the City, is currently running on what Woodburn describes as “seed money”, provided by insurers, brokers and trade associations but, long-term, it will be funded through the annual fee.
He has four staff, expected to increase to eight by the end of the year and reach 30 by the end of 2000.
A total of 30,000 members are expected to sign up, starting with direct sellers and those used to some form of regulation,such as Association of British Insurersbrokers. Travel agents will be among a later batch.
All members will have to have professional indemnity and a separate account for insurance money and they will also have to abide by a strict code of conduct.
This has been drawn up by GISC, based on the Association of British Insurers code but also including parts of the Insurance Brokers Registration Council and Lloyds of London codes of conduct.
“This will be a significant part of the consultation,” said Woodburn.
n Consultation process launches today at the Thistle Glasgow Hotel.
n GISC roadshow at the International Conference Centre, Birmingham, October 27; Renaissance Manchester Hotel, November 1; Crowne Plaza Bristol, November 3; Conference Forum Sedgwick Centre, London, November 10.
n Consultation ends December.
n January launch planned.
n Registration starts February/March.