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Travel Survey
Travel Insurance Opinion Survey
What challenges do you see for those operating in the travel insurance sector in 2005? Do these differ from past years?
Bryan Warburton, Holmans: Clearly the biggest effect to hit, not only the travel insurance sector, but all aspects of general insurance is the introduction of the Financial Services Act in January 2005. As one who has attended briefings, wrestled with the near indigestible prose of the written word, I feel strongly at this stage that this new legislation will not only be self-defeating of its objectives but put a draconian stranglehold on good and sensible development of insurance provision in the UK over the coming months.
Travel insurance is a classic example of how muddled thinking has come concerning law. It is true that in this market there has been a need for change with a misconception by the public at large that all policies were practically the same and you simply bought the product as a distress purchase at the point of sale of the overseas trip or holiday.
Discover
These policies were in the main mis-sold by the travel industry who had little
knowledge of the policy detail and invariably the holidaymakers would later
discover to their cost that when claims were made, cover was not available
for perhaps activities undertaken or pre-existing medical conditions.
In fact, all policies are different and there is clearly a need for professional selling of these products so that the consumer gets the right cover for his needs. This is no lightweight matter as life and limb are at stake.
Despite the above considerations we find that ABTA members secured from the Treasury exclusion from the provisions of the Act for travel agents if they introduced a travel insurance training programme. This was on the basis that the Treasury stated that there was no evidence of mis-selling of this product by travel agents when the Consumers Association had just submitted a report identifying 95% of policies mis-sold.
In fairness to the wisdom of the public, it is interesting that over the last five years or so the sale of travel insurance by the travel industry has fallen from 95% to around 45% now. It is also of concern that, going forward, a plethora of non-insurance experience can be allowed to conduct sales of these products in the guise of supermarkets, chemist, booksellers, credit card providers, post offices and other non-qualified businesses, such as Internet operations.
Professionalism
I see some of the main objectives of the FSA as being to increase the financial
proprietary of insurance dealings between customer, broker and underwriter;
to improve the awareness of the customer of the product so that he can maximise
the value he gets from the purchase; and generally improve the overall professionalism
of insurance broking and underwriting by rigorous training programmes.
Much of this is and has been happening over the years with natural growth, but aims to improve the lot of the consumer are somewhat contradictory when one considers that the extra costs being incurred for compliance officers, PI insurance and documentation can only put up premiums.
Whilst I am not forgetting European directives, it is hoped that wisdom and common sense will prevail in our industry to enable the UK to continue its global role as one of the leading innovators and centres.
Where do the greatest travel insurance sales opportunities lie in the foreseeable future? Is travel insurance sufficiently perceived by brokers as a mainstream business?
Bryan Warburton, Holmans: The answer to this question must lie in the recent history of travel insurance sales and the current observed trends. If we take the case of the travel agent, where there has been the biggest drop of business, it is conceivable that registered brokers/intermediaries could join with travel groups or large agents when the 2 year exclusion period from statutory control expires.
In the meantime the current state of an over competitive market with a reduction of underwriting capacity could provide an exciting challenge for brokers. I feel that there is scope in travel insurance for good management information, coupled with continual underwriting review, to produce correct rates which are mutually beneficial to all parties. This enables the broker to sell travel insurance in a more professional way which is more dependent on cover than on price.
Although this will be a slow educational process it will eventually be to the benefits of the customer in that he will get a product more suited to his needs and requirements at the right price.
Now is therefore the time for brokers to get themselves good agency facilities
and start promoting travel insurance to their own client database and the
public. They, I am sure, will be surprised that travel will no longer just
be accommodation business, but a serious contributor to commission income.
General Insurance Spring 2005
