Wish you weren't here
The Government has issued a clear warning to travel agents that it is not happy with the way they are selling travel insurance as an add-on to a holiday. It is a big business. The Treasury estimates that every year ten million people spend £335 million buying holiday insurance from travel agents, about half the travel insurance that is bought. So what are they doing wrong? In a word mis-selling it.
Technically this week the Government merely announced a "call for evidence" on the subject to "investigate whether travel insurance sold with a holiday is being mis-sold". But launching it Treasury Minister Ed Balls made clear his own concerns. He quoted research by Which?, the consumer organisation. Earlier this year it found that barely a third of travel agents asked medical questions compared with eight out of ten sales staff working for banks or insurance companies. "The danger is that people will go away with a pre-existing medical condition that will not be covered" said Balls. Only one in five explained what was covered and, most alarmingly, none explained what was not covered. Again, banks and insurance companies were much better – eight of ten explained what was covered and more than half explained what was not.
One reason for the difference is that most insurance is regulated – covered by the Financial Services Authority and, if things go wrong, the Financial Ombudsman Service. But when regulation was introduced in January 2005, some insurance sales were not included. One of the biggest exemptions was holiday cover sold by travel agents. That means the people who sell it are neither regulated nor, in most cases, trained. They may know about the best deals for a fortnight in Cancun or a family trip to Disneyworld. But when it comes to the exclusions on your trip insurance, they probably do not even know about them – never mind mention them to you. It is just a profitable add on.
So after nearly three years and what Ed Balls called "growing concerns" about holiday insurance sales the Government may decide to regulate it. But not for a while. The call for evidence lasts until 22 February and after that the Government will decide what to do.
Meanwhile anyone travelling abroad should make sure that they have adequate insurance that does cover the risks they are concerned about. One estimate suggests that half the policies in force do not cover medical expenses following a terrorist incident. If you are going away more than once in a year, it is almost certainly better to buy an annual policy. And if you use a regulated insurance broker you will be able to complain to the Financial Ombudsman if things go wrong.
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