From 1st January 2009, travel firms and tour operators
selling such products, known as Connected Travel Insurance, or CTI,
will need to be fully authorised by the Financial Services
Authority. Alternatively, they may choose to become an appointed
representative of another, authorised firm or limit their role to
effecting introductions or providing information.
Dan Waters, the FSA's Director of Retail Policy and Themes,
announced the publication of the new rules yesterday.
"Regulation is only seven months away and firms need to make
sure they are fully prepared," he said. "We start accepting
applications next month and firms are advised to apply early to
ensure that they are ready in good time for the start of the new
regulation next January."
Travel insurance bought separately from travel or accommodation
has been fully regulated since 2005. The FSA hopes that bringing
CTI into the regulatory fold will ensure customers are given clear,
concise and consistent information about their travel insurance
before they decide to buy.
Brochures and application forms for CTI will be treated as
financial promotions under the Insurance Conduct of Business Rules
(ICOBS) and will need to be clear, fair and not misleading and
approved by an authorised firm. CTI firms will also have to meet
FSA requirements for training staff, handling client money and
capital resources.
Under the new rules published by the FSA yesterday, CTI firms
will be required to have professional indemnity insurance to the
same minimum level as general insurance intermediaries – €1 million
for a single claim and €1.5 million in aggregate or, if higher, 10%
of the firm's annual income up to €30 million.
The new regulatory regime also means that complaints brought by
consumers and small businesses against CTI firms can be decided by
the Financial Ombudsman Service. And in cases where a CTI firm is
unable (or unlikely to be able) to meet its liabilities to its
customers, they may be eligible to claim statutory compensation
under the Financial Services Compensation Scheme.
The FSA believes that only 200 or so travel firms will decide to
apply for full authorisation. Applications will be accepted as from
30th June 2008 and must be submitted by 15th November. Those
applying by 30th September will qualify for a 30% reduction in the
fee.
The FSA is also planning to run an information campaign for CTI
customers, including schools and charities, to let them know about
their new rights and remedies.
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