Consumers to benefit from FSA regulation of the sale of all travel insurance

The Economic Secretary to the Treasury, Kitty Ussher MP, today confirmed that the Financial Services Authority (FSA) will be responsible for the regulation of the sale of travel insurance sold along with a holiday from 1 January 2009. The FSA will now consult on new rules before the regulation comes into effect.

The FSA is currently responsible for regulating the sale of general insurance products, including travel insurance sold by insurers and insurance brokers, but do not regulate the sale of travel insurance sold along with a holiday.

21 million consumers purchase travel insurance each year, in a market worth £670m in 2006, with travel insurance sold by travel agents and tour operators accounting for around a quarter of sales. There were 64.2 million visits abroad by UK residents in 2004, two-thirds of these were holidays, of which just under half were package holidays.

Kitty Ussher said:

"Travel insurance is a relatively complex product and things do sometimes go wrong during the sale process. Extending FSA regulation to cover the sale of all travel insurance, and providing consumer access to the Financial Ombudsman Service, means that if something does go wrong, consumers will be protected.

"I have fully considered the potential impact upon the travel industry and I am confident that the FSA will introduce a proportionate and risk-based regime. I strongly encourage the travel industry to contribute to the FSA's consultation on how best to regulate travel firms selling insurance, to ensure a regime that benefits both consumer and seller."

Travel firms can apply for FSA authorisation to sell travel insurance along with a holiday from 30 June 2008. An interim authorisation regime will allow firms who have applied on or before 15 November 2008 to continue selling travel insurance while their application is processed.

If travel firms choose not to seek FSA authorisation, they can become an Appointed Representative - where a regulated firm is responsible for the unauthorised firm, or an Introducer Appointed Representative - where the firm do not sell insurance, but can direct customers to an authorised seller.

Notes for editors

1. The then Economic Secretary launched a review of travel insurance in 2006. A further consultation, accompanied by draft legislation and a partial Regulatory Impact Assessment, was launched in June 2007. See:

2. Final legislation will be available shortly from the Office of Public Sector Information.

3. Details of the FSA's consultation are available from the FSA's website.

4. The summary of consultation responses document and Final Impact Assessment can be accessed on the travel insurance review index page.

5. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.

6. Non-media enquiries should be addressed to the Treasury's Correspondence and Enquiry Unit on 020 7270 4558, or by email to public.enquiries@hm-treasury.gov.uk.

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