Policy exclusions and industry
22. While some problems were felt to relate specifically
to the weaknesses of a sale process undertaken by non-insurance
professionals, some of the problems with the potential adversely
to affect the protection available to consumers appeared to be
common both to bundled and standalone travel insurance products.
Mr Brehany considered that policy exclusions from four major insurance
companies and tour operators effectively "stripped the holidaymaker
of any real protection".
23. The Economic Secretary to the Treasury expressed
particular concern about the impact of exclusions relating to
cover for terrorist incidents. He cited ABI data indicating that
only half of insurance policies covered medical expenses in the
event of a terrorist incident. Around ten million United Kingdom
holidaymakers in 2006 would not therefore have been covered for
medical expenses in the event of terrorist incidents.
HTW also referred to policies that excluded medical expenses and
personal accident cover in the event of terrorism.
The Treasury's call for evidence for its travel insurance review
anecdotal evidence suggest that it is not always
clear that people understand what is and, more importantly, what
is not covered by their travel insurance policy. Terrorism cover
is an example of where individuals may only realise after the
event that they may not be covered
The Government is working
closely with the insurance industry to ensure that, where policies
do exclude cover for acts of terrorism, these exclusions are signposted
to the consumer prior to the purchase of the policy.
24. As part of its review of its general insurance
regime, the FSA is expected to examine whether disclosure documentation
is suitable for the consumer's needs.
Mr Brehany went further, arguing that consumer understanding would
be enhanced by insurance contracts "produced on an industry-wide
standard format, with clear explanation of benefits, alongside
clear explanations of exclusions", pointing out that this
was in line with practice in certain other insurance markets.
ABTA's response and travel without
25. Mr Mike Monk, Head of Finance of ABTA, was sceptical
about evidence of consumer detriment in the bundled travel market.
He acknowledged that consumers often spent little time discussing
travel insurance packages, but argued that this was unlikely to
be changed by fresh regulation because it would not change consumers'
reluctance to read insurance documents.
He considered that travel agents were best-placed to sell travel
insurance at the time when consumers most needed it, at the same
time as they bought their holiday.
ABTA viewed the suggestion of a standard contract as "bizarre",
arguing that it would undermine market differentiation.
26. Mr Monk argued that any consumer detriment alleged
in connection with sales of travel insurance by travel agents
ought to be considered in the context of the risk of travel without
Fourteen per cent of people who go abroad do not
take out travel insurance. I would suggest that if they cannot
buy at point of sale that number is going to increase and that
is going to cause consumer detriment.
The ABI made a similar point:
The Foreign and Commonwealth Office is also rightly
concerned that people should travel with adequate protection.
It is therefore important that regulation does not put people
off from purchasing travel insurance.
20 Travel Insurance Review: Call for evidence,
para 3.1 Back
Ibid, para 3.2 Back
Ev 71 Back
Ev 72 Back
Qq 4-5 Back
Ev 71 Back
Q 4 Back
Ev 71 Back
Ev 39 Back
Q 4; Ev 56 Back
Ev 63 Back
Q 151 Back
Travel insurance review: Call for evidence, para 3.24 Back
Ev 68 Back
Q 151 Back
Ev 67 Back
Travel insurance review: Call for evidence, p 13 Back
Ibid, para 3.13 Back
Ev 70, 63 Back
Qq 44-47 Back
Q 48 Back
Q 47 Back
Q 65 Back
Q 52 Back
Ev 32 Back