Ed Balls launches Travel Insurance Review call for evidence

Today, the Economic Secretary to the Treasury, Ed Balls, launched the Travel Insurance Review public call for evidence and highlighted the need for travel insurers to be clear and transparent about consumers' cover in the event of a terrorist incident.

The call for evidence published today follows the launch of the Review of Travel Insurance in August this year which highlighted the different regulatory approach taken with the selling of travel insurance sold alongside a holiday and standalone travel insurance. In recent years there have been growing concerns from consumer groups and sections of the industry that this difference causes consumer detriment, raising questions about whether regulation, appropriate redress and complaints mechanisms should apply to travel insurance sold alongside a holiday.

Ed Balls said:

"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. 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 review will investigate whether travel insurance sold with a holiday is being mis-sold and the consultation launched today sets out options to improve the selling of insurance provided by travel agents. These options include strengthened self-regulation by the travel insurance industry and the possibility of full regulation by the Financial Services Authority.

Notes for editors

1. The Economic Secretary, Ed Balls launched the Review of Travel Insurance on 4 August 2006.

2. The review is working to:

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.

3. Today Ed Balls launched the next stage of the review process - a call for evidence. The call for evidence will close on 22 February. Following the consultation the Government will make a decision on the options set out in the review, including industry led regulation and FSA regulation.

4. An example where consumers do not always have information about their policies are the exclusions made for terrorism risks. According to the Association of British Insurers, 50% of all travel insurance policies do not cover medical expenses in the event of being caught in a terrorist incident.

5. There were 64.2 million visits abroad (two-thirds of holidays) by UK residents in 2004. Spending on visits abroad by UK residents was over £30 billion. Some 20 million consumers purchase travel insurance each year in a market worth £670m. Travel insurance sold by travel agents/tour operators accounted for just under 50% of all travel insurance sales in 2004.

6. A Which? report this summer found that only 35% of travel agents asked medical questions (compared to 81% of banks and insurers), 19% explained what the policy covered (compared to 81% of banks and insurers) and 0% explained what the policy did not cover (compared to 56% of banks and insurers). It concluded that some travel agents and tour operators were mis-selling the product. Issues around mis-selling will be investigated in the Review.

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

8. Non-media enquiries should be addressed to the Treasury Correspondence Unit on 020 7270 4558, or by e-mail to public.enquiries@hm-treasury.gov.uk

9. 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 to Treasury press release to be sent to you automatically by e-mail you can subscribe to this service.

10. The Travel Insurance Review consultation document can be accessed from the Treasury website.