An investigation into the sale of travel insurance with package holidays has been launched by the Treasury. With the travel insurance sector worth more than £650m in 2006, the investigation could have far reaching effects.
A number of consumer groups have voiced concerns that this type of travel cover is over-priced, being mis-sold or policies contain too many get-out clauses. Travel insurance that is sold as an "add on" to a holiday is unregulated, but the sale of stand-alone cover is regulated by the Financial Services Authority (FSA) and the review may lead to FSA regulation of the whole travel insurance industry.
Ed Balls, the Economic Secretary to the Treasury, called for a review of the industry following a meeting with the influential Treasury Select Committee.
"In recent years there have been growing concerns from consumer groups and sections of the industry that the market is not working as well as it could, raising questions about whether regulation and appropriate redress should apply to the selling of travel insurance," he said. "We therefore need to get to the bottom of whether travel insurance sold with a holiday is being mis-sold, and whether we need to be doing more to educate consumers to consider the cover they want and ensure that they are properly informed."
The Government last examined travel insurance back in 2003 but decided against imposing regulation because of concern over the impact on the cost of package holidays. It also shied away from regulation because travel agents insisted their own industry code was providing consumer with sufficient protection, the Treasury said.