27 October 2008

Trade voices concern over insurance regulation

Concerns that more people will travel abroad without travel insurance after the extension of regulation by the Financial Services Authority have been highlighted.

The results from a TravelMole online survey, commissioned by leading insurance company AIG UK, reveal that agents and operators believe some companies will stop selling travel insurance altogether and others will reduce their focus on what used to be a key revenue earner.

The FSA will start regulating travel insurance sales through agents and operators from January 2009, but despite the imminence of the new regulation 19% of respondents are unaware that the change is coming.

Sixty seven per cent of expected to become Ã¢â¬Åâœappointed representativesÃ¢â¬~ or Ã¢â¬ÅâœintroducersÃ¢â¬~ of business for insurance companies, but 19% expected not to sell or give up selling insurance.

Not one expected to apply to the FSA to be regulated directly, with one respondent commenting: Ã¢â¬ÅâœThe principle of regulation is a good thing for consumer confidence. However, the paperwork and processes are a civil servantÃ¢â¬â¢s joy and a sensible personÃ¢â¬â¢s nightmareÃ¢â¬~.

Travel insurance companies are expected to limit the number of agents and operators offered appointed representative status, due to the liabilities they will face for the activities of these agents and operators.

Although many agents and operators will become introducers 57% of respondents aware of the regulatory change expected their insurance revenue to fall and 25% expected redundancies in their company as a result of the new regulation.

The survey also found that:

*80% expected fewer agents and operators to sell insurance;

*74% felt fewer customers would buy insurance through the trade;

*70% felt the cost of policies would increase because of regulation.

Worryingly, of those respondents who felt the cost of insurance will increase, more than 94% expected that if customers were not offered insurance when buying a holiday or travel arrangement, they were less likely to buy it at all and may well travel without any protection.

If this scenario plays out in reality, it will clash with the spirit of regulation which is to ensure consumers purchase the right level of cover when travelling abroad.

by Phil Davies

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Your Comments (3)

Excessive Commissions Could Offset Proposed Increases

Whilst Travel Agents do need every penny/cent/drachma of income I think some insurance commissions that well exceed 15-20% should be rolled back to cover any perceived cost increases. I have been offered travel insurance for travel on denied coverage travel providers which serves to highlight that some, even significant numbers of, Travel Agents do nothing other than sell a policy without regard to its coverage validity. If the retail travel trade increases insurance premiums they should always be aware that alternative coverage is available at reduced cost on-line or at the end of a toll free call.

By Jon Hewson, Tuesday, October 28, 2008
No surprises !!

The trade community has been working very hard either individually or collectively to highlight the range of concerned, including majority of the travel agents or tour operators who produce less than &#pound;1,500 net premium per month per branch will face a tough challenges to be an 'Appointed Representative' (AR) and therefore it will only give them the other 2 alternatives 'âœ either to be a 'Introducer Appointed Representative' or 'give-up' !! Bear in mind more than 65% of travel agent or tour operators branches produce less than &#pound;1,000 net premium per month per branch (average travel agent's commission between 25% to 30%). Although to some it was a 'surprise or shock' to see a small number of applications to be regulated directly but for sure it was no surprises to majority of the travel insurance providers to the trade. Based on our survey, majority of our agents share the same vision that comes 1st Jan 2009, the trade have a greater opportunity to compete head on with the banks; supermarket and post office by operating on a lower margin with higher conversation rate. I sincerely hope the trade media will be a bit more positive and supportive, as compare to the national media towards the current financial turbulent.

By Patrick Chong, Monday, October 27, 2008
FSA does not understand the business

The biggest problem with FSA control is that they do not understand the business, as has been proved by their lack of knowledge of the banking industry! It is MORE serious for the travel industry as we, the agent, will not be able to make any comment on what we are selling. In addition we will not be able, so I understand, any other insurance if we sign up as an introducer for a company. This looks fine until you realise that A. we will not be able to sell UK coach holidays with the holiday company's insurance. Or maybe the world cruise that they have been planning for many years and the cruise company's insurance will be best. We cannot sell the cruise! In addition we cannot suggest to the client that the companies insurance is best for them. I suppose the FSA expect us to tell the client to call the operator direct to add the insurance? What a dreamworld they live in. B. Even more serious is when insurance is " free " or included. in this case I suspect we will not be able to sell the product at all. What a mess and what will they do. Nothing because they expect lots of us to sign up and then create the revenue for them. It seems a pity that they have interefered with a system that has been operating sucessfully and without major problems for years only to make it worse.

By Mr Davd Wootton, Monday, October 27, 2008