MONEY COMMENT
By
One important thing that we consumers need to grasp is the difference between salesmen and advisers. A salesman (or saleswoman) persuades us to buy his company's wares, thus boosting his earnings and his employer's profits. This category includes travel agents, car dealers and staff selling extended warranties in electrical stores, who are largely governed by an industry's code of practice. Generally speaking, professional advisers have a duty of care to give us "best advice"; will have professional qualifications; and will be monitored by a regulator appointed by legislation, such as the Financial Services Authority (FSA). Nevertheless, financial advisers, together with financial services providers, spawned the personal pension, mortgage endowment and freestanding AVC mis-selling scandals... So, can we trust anyone when buying financial products? The answer is: yes, ourselves - if we've done our homework and shopped around earlier. Take travel insurance: there's a huge choice of products, and fierce competition among providers of this cover. Yet, according to the Consumers' Association (publishers of Which? Magazine), most of us still get ambushed into buying it from travel agents. Independent market research company Defaqto estimates that the travel insurance market is worth £550 million a year, and we can choose from over 700 different single-trip policies. Defaqto also calculates that, thanks to buying around 60% of our policies from travel agents, we are over-paying for cover to the tune of £250 million every year. Why, when there are over 180 suppliers eager for our business: direct insurers, insurance agents and brokers, banks, building societies, retailers, supermarkets and travel agents? Only ten products make Defaqto's "Best Buy" tables and, surprise, surprise, not one comes from a travel agent. Interestingly, Defaqto hasn't given any single-trip policy five stars for both cover and price, which shows that some low-cost products can offer limited protection. For annual (multi-trip) policies, Defaqto has awarded two policies the illustrious ten stars. What's more, any travel agent's policy is never likely to become a best buy (most score the minimum two stars). This is because they normally offer inferior cover at up to eight times the price of the best buys - what a swindle! One European holiday analysed by Defaqto had a price range for travel insurance of under £10 to over £80 - guess who was at the top end? For the record, the most expensive providers are: On February 10, the Treasury revealed that, from 2005, the FSA would regulate travel insurance. Hurray - this can only be good news for fed-up holidaymakers. In summary:
