04 August 2006
Treasury investigation into travel insurance
The Economic Secretary to the Treasury, Ed Balls, today announced a new inquiry into the sale of travel insurance purchased as part of a package.
20 million people buy travel insurance every year, covering medical expenses, the replacement of lost or stolen items, cancellation of travel and other items. Many of these people buy their travel insurance from travel agents alongside their package holiday.
Whereas the stand-alone sale of travel insurance is subject to the same regulatory controls as the sale of other forms of insurance, travel insurance sold as part of a package is currently exempt from those controls.
In response to concerns from consumer groups, the Treasury is today launching an investigation into the specific problems faced by consumers purchasing travel insurance as part of a package, and considering whether any changes to the regulatory framework are required to provide greater protection for them.
Launching the review today, Ed Balls said:
“Millions of British families have worked hard all year to pay for their summer holidays and are hoping they pass off without a hitch. But thousands of holidaymakers will suffer cancelled flights, lost valuables, and even medical problems. And too many people will find they are not properly covered by their travel insurance."
“Our investigation will ask whether it’s fair to put all the pressure on ordinary families to read the small print and ask the right questions to make sure they are properly covered. It will ask whether the travel industry should be doing more to ensure families are not left high and dry on their holidays and whether we need to strengthen regulation to protect them. The first step will be to collect all the evidence from consumers and industry experts - and then work out what needs to be done.”
The review will work with business and involve a full public consultation to be launched early this autumn. HM Treasury will consider the extent to which the travel industry has introduced measures to improve the protection of consumers purchasing travel insurance and whether these are working. If any additional regulatory safeguards are considered necessary, they will be implemented in a sensitive and proportionate manner, with particular concern to limit any additional costs for the industry, which would ultimately be passed on to consumers.
Notes for editors
1. ONS statistics show that there were 64.2 million visits abroad by UK residents in 2004. Two-thirds of these visits abroad were holidays, just under half of which were package holidays. Spending on visits abroad by UK residents was over £30 billion.
2. Some 20 million consumers purchase travel insurance each year in a market worth £670m in 2006. Travel insurance sold by travel agents/tour operators accounted for just under 50% of all travel insurance sales in 2004.
3. The Financial Services Authority is responsible for regulating the sale of general insurance products. However, they do not currently regulate sales of travel insurance sold as part of a package. This position was reviewed in 2003, and while the Treasury decided at the time that there was insufficient evidence of problems with consumer protection to warrant changes to the regulatory framework, it undertook to keep the position under review.
4. The review will:
establish a qualitative and quantitative evidence base to develop a better understanding of any significant problems in this market;
consult widely with stakeholders, with particular reference to the scale and nature of any consumer detriment concerning the operation of the market in relation to the sales of travel insurance sold as part of a package;
consider options for regulating the sale of travel insurance sold as part of a package including whether they should be subject to FSA regulation.
5. The Treasury will be conducting preparatory work throughout the summer and holding initial consultations with stakeholders, pending the launch of a formal consultation process in early autumn 2006. The outcome of the review and any resulting decisions will be announced in early 2007.
6. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.
7. Non-media enquiries should be addressed to the Treasury’s Correspondence and Enquiry Unit on 020 7270 4558, or by e-mail to firstname.lastname@example.org
8. This press release and other Treasury publications and information are available on the Treasury website at http://www.hm-treasury.gov.uk/. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.
Back to top