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Abolish FSA Regulation of Connected Travel Insurance Sales

Comment 3rd September 2010

We write to ask that you repeal this legislation the effect of which, in our experience, has been the opposite of that intended and has resulted in a far worse deal for the consumer.

Why does this matter?

As a result of FSA regulation it is now much harder for travel agents to sell the travel insurance of the holiday provider. We are a tour operator and an authorised representative of a compliance organisation which allows us to sell Connected Travel Insurance direct to the public. However, only those of our travel agents registered with the same compliance organisation can sell the insurance we offer. Some are registered with compliance organisations which allow them to sell our customers different policies, but such policies have to be widely drawn to fit the products of many tour operators and therefore do not always meet our customers needs and are also generally far more expensive than the policies we offer. The overwhelming majority of travel agents are authorised to sell only one policy since the training and compliance required to offer advice on a range of policies is prohibitively expensive, especially for such a low value item (the average sale price of insurance to our customers is less than £14). Many other agents are not registered with the FSA at all and as a result the customer often emerges from the travel agent uninsured and faced with the need to visit an insurance broker, few of whom are interested in selling such a low value product as travel insurance, or else travelling without cover. We have seen a fall in the take up of our insurance from 61% pre FSA regulation to 42% now; this represents a near 60% reduction in the insurance sold through agents. As a result we are seeing a rise in customers travelling uninsured. With substantial risk of cancellation and illness, particularly in our elderly market, we feel it is unwise to book without insurance.

 From the point of view of the consumer, the result of FSA regulation has been to limit choice, add considerable inconvenience to the process of purchasing insurance, limit the appropriateness and hence value of the purchase and increase the number of holiday makers travelling uninsured.

 From the point of view of the trader, compliance with the FSA regulations has resulted in a dramatic increase in cost and a substantial fall in sales. Our costs have increased through the need to rewrite software to ensure only regulated travel agents sell the policies we offer (which alone has cost us almost £20,000 in software costs and management time) and also through the need for on-going training and the payment of fees to the compliance organisation. Meanwhile, our sales of insurance policies have fallen by a third since so few travel agents can now sell our policy and have to sell much more expensive generic policies which are not appropriate to our market.

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