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Friday, November 24, 2006

The Great Travel Insurance Rip Off

As we all know, Britain's financial services industry has something of a poor reputation.

The long suffering British public have, over the past few years, had to endure; the endowment loans mis-selling scandal, unjustifiably high banks charges, extortionate interest rates on unsecured loans and credit card debts and the mis-selling of insurance policies to cover these debts.

It is hardly surprising that the British public are fed up with the financial services industry, and have lost their trust in it. Therefore it should come as no surprise to learn that the Treasury have found yet another area of shameful conduct, that of travel insurance policies.

Travel insurance policies, sold with package holidays, brings in the insurance companies £1BN per annum.

A "nice little earner" by anyones standards!

The Treasury has decided to probe this area after complaints that the policies are over-priced, and contain too many get-out clauses. Travel agents could face regulation by the financial services watchdog, if they are found to be mis-selling insurance policies.

By way of example, over 50% of policies sold don't cover terrorist attacks.

As is usual with the financial services industry, nothing is ever quite what it seems. Stand-alone travel insurance is regulated by the Financial Services Authority (FSA). However, policies sold as a holiday add on are not.

Ed Balls, Treasury Minister, who launched a public consultation yesterday said:

"We need to find out whether travel insurance sold with a holiday is being mis-sold and if we need to educate consumers to consider the cover they want and ensure they are properly informed."

A Which? survey of travel agents found that many policies were mis-sold, with customers not told what policies do and don't cover and not warned that pre-existing medical conditions are excluded.

Which? spokeswoman Emma Bundy said:

"Many policies are sold by travel firms which are not regulated so policyholders have no right of redress."

The common thread to the problems of Britain's financial services industry is that of "mis-selling"; whether it is the mis-selling of endowments, debt insurance, debt or travel insurance.

A cynic might argue that all the banks, insurance companies and other money men want to do is to get their hands on people's money; without giving a damn for the suitablility of the product, or the client profile.

Whilst banks and insurance companies might argue that this is not so, an ever growing number of people in Britain are now taking this to be the case.

The financial services industry needs to learn that a reputation once damaged is very hard to restore. Whilst the money men in the City will be enjoying exceptionally large bonuses this year, they may care to think on that once people finally lose confidence in the system they will stop buying the products. As such, the bonuses in future years will be very spartan indeed.

What goes around, comes around!

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