FSA to regulate all travel insurance

The Treasury has widened the powers of its financial ombudsman to scrutinise travel insurance providers, following criticism that cheap policies were leaving holidaymakers at risk.

A report by MPs published earlier this year said millions of consumers were being caught out by small print in holiday insurance policies.

The Financial Services Authority (FSA) currently regulates travel insurance sold on a stand-alone basis. However, following today's announcement it will also scrutinise travel agents who sell insurance.

The new measures will mean that holidaymakers who buy insurance alongside their holiday will now get the same regulatory protection and rights as consumers buying separate insurance.

Around 20 million people buy travel insurance each year. The Treasury said many of them were putting themselves and their families at risk by getting policies that did not cover their needs.

Economic secretary, Ed Balls, said: "This happens as consumers have a 'knowledge gap' when buying travel insurance, as they often do not understand what they are buying or what it covers.

"Evidence shows that companies regulated by the FSA are better at getting consumers to make an informed choice because they are better at explaining the key features and exclusions of the product and guiding the customer through the sales process."

The changes are expected to come into effect from January 2009, following a further period of consultation.

An FSA spokesman said: "We will review the proposals following the next stage of public consultation by HM Treasury."

A report by the cross-party Treasury select committee in February said that 10 million people who travelled abroad last year would not have been covered for medical expenses if they had been caught up in a terrorist attack.

"There are huge numbers of people, millions literally, who have been sold travel insurance policies which do not meet their needs," said the committee's chairman, Labour MP John McFall. "All too often, exclusions are buried in the small print."

He said a common exclusion invoked by insurers to avoid making payouts was that a consumer had failed to inform them of a "pre-existing condition", which can even include pregnancy.

source:money.guardian.co.uk