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FSA/PN/133/2007
18 December 2007

The Financial Services Authority (FSA) today published a Consultation Paper setting out its detailed plans for regulating travel insurance sold alongside a holiday – known as Connected Travel Insurance (CTI) – which is mainly sold by travel firms and holiday providers.

This follows the Treasury’s announcement last week confirming that the FSA will regulate CTI. The FSA already regulates stand-alone travel insurance, i.e. not connected to any particular travel arrangements and bought direct from an insurer or through an insurance broker.

Dan Waters, FSA Director Retail Policy, said:

"We have carefully considered the CTI market in constructing the new regime. It is designed to be proportionate to the way the market operates and the risks it poses to consumers."

The new regulatory regime will be based on high-level rules and guidance with the aim of ensuring that:

• firms are fit and proper and appropriately resourced;
• firms' staff are competent to undertake the business they do;
• customers get sufficient, clear, concise and consistent information about a firm's services and products so they can make informed choices;
• customers who want advice receive good quality advice and are sold suitable products which take account of their circumstances and needs; and
• if things go wrong, customers are able to seek redress.

Travel firms will need to decide whether to be authorised by the FSA, become representatives of another authorised firm or no longer offer CTI products. They may also become an unregulated introducer in certain limited circumstances.

Following the consultation period, ending on 18 March 2008, the new connected travel insurance regime will come into force from 1 January 2009.

Notes for editors

1. Consultation Paper 07/22 'Regulation of Connected Travel Insurance' is available on the FSA Website.
2. Connected travel insurance is travel insurance sold alongside a holiday or other related travel. Travel firms, such as travel agents, tour operators, coach tour operators, airlines, ferry companies, train companies and accommodation providers, often make available travel insurance connected to travel arrangements as a service for their customers.
3. The sale of general insurance, including stand-alone travel insurance, became regulated in the UK under the Insurance Mediation Directive (IMD) in January 2005. Connected Travel Insurance is exempt under the IMD and the Treasury provided an exclusion for CTI in the Regulated Activities Order, which it is now removing following its review of travel insurance. The review was launched in August 2006 with a call for evidence published by the Treasury on 23 November 2006. On 26 June 2007 the Treasury announced its intention to extend FSA regulation to CTI and launched the next stage of consultation including draft legislation and a partial Regulatory Impact Assessment. On 13 December 2007 the Treasury published a Feedback Statement confirming its intention to remove the exclusion for CTI and bring it under FSA regulation.
4. The FSA has set up a section on its Website providing information about regulation of CTI.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.