Session 2006-07, 22 February 2007
Fourth Report: Are you covered? Travel insurance and its regulation (HC 50)
Treasury Committee calls for holiday insurance crackdown after 10 million left without medical cover for terrorist incidents
Around ten million UK holidaymakers who travelled abroad last year were not covered for medical expenses in the event of terrorist incidents, according to a new report from the Treasury Select Committee.
Committee chairman John McFall MP said: “This is an astonishing number of people to have been exposed to this seriously frightening chance of loss in this way.
“It became clear during our inquiry that there are huge numbers of people, millions literally, who have been sold and are at risk of being sold in the future travel insurance policies which do not meet their needs.
“There is widespread and insufficient awareness among consumers of exclusions from cover in areas such as terrorist acts and pre-existing medical conditions, including pregnancy.
“We are particularly concerned at evidence that around 10 million UK holidaymakers in 2006 would not have been covered for medical expenses in the event of terrorist incidents.
“All too often, exclusions are buried in the small print of insurance policies. Holidaymakers are risking damage to their health or considerable financial loss if they require treatment while abroad or repatriation to the UK.”
Mr McFall added: “There can be no doubt that consumers are suffering a detriment here, and that overcoming this is a mammoth challenge for the insurance industry, for all those who sell travel insurance and for those who regulate them.
“It is essential that all these groups should work together with the Government to develop insurance policies that are summarised in plain English, and that clear and prominent information is provided on exclusions.
“The holiday travel insurance industry must ensure that its products are promoted in such a way as to maximise the number of holidaymakers with proper cover.
“It goes without saying that holidaymakers are at risk if they go abroad without travel insurance or without adequate cover from the policy that they have chosen.”
The Committee of MPs noted that UK citizens undertake over 60 million visits abroad each year, of which around two-thirds are holidays.
Mr McFall said: “It is clear that significant numbers of those travellers are not covered in the way they need to be for accidents and other problems while on holiday.”
He added that around 20 million travel insurance policies are purchased each year-“We examined the different ways in which such travel insurance is sold and regulated, and we also looked at the changing regulatory environment for general insurance as a whole.
“While we concluded that there are welcome trends in the approach to regulation by the Financial Services Authority (FSA), we consider that there is significant evidence of consumer detriment in the travel insurance market.
Mr McFall said: “The Committee observed that there is evidence to suggest that problems in the sales process are likely to be accentuated when sales take place away from the professional regulated insurance environment through an intermediary such as a travel agent.
“We see merit in the introduction of a coherent and unified system of statutory regulation for the travel insurance market and we believe that the FSA is best placed to deliver such a system. Self-regulation for travel insurance sold by intermediaries needs to be replaced by clear and consistent regulation.
“If the FSA were to assume these additional responsibilities, it would need to ensure that regulation across the travel insurance market was consistent, principles-based and risk-based.
“It is the committee’s recommendation that, if the Government is satisfied that the FSA can deliver regulation that meets these requirements, it should extend the scope of FSA insurance regulation to cover what has become known as the ‘bundled’ travel insurance market.”
Reports can be purchased from the Stationery Office bookshops (tel: 0870 600 5522). The full text will also be available on the internet on the day of publication: