MONEY COMMENT
Don't Trust Travel Agents

By Cliff D'Arcy
February 13, 2003

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:

• Travel agents (Highest cost)
• Banks
• Retailers/Supermarkets
• Insurance agents
• Direct insurers
• Insurance brokers (Lowest cost)

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:

• Forget the convenience of arranging cover with your travel agent or tour operator. That convenience will increase the cost by a factor of up to eight. Why buy a Nissan Micra for the price of a Porsche Boxster?

• Compulsory tie-ins between holiday discounts and travel insurance have been outlawed. Any salesman claiming otherwise is lying and breaking the law. Report these people to the Office of Fair Trading.

• If you reject a travel agent's cover and they "stonewall" by refusing to book your holiday without proof of alternative cover, leave immediately and find another travel agent. These people don't deserve your business. Alternatively, pop into the nearest Sainsbury's store or Nationwide BS branch (the only two High Street companies offering "Best Buy" products).

• You have a statutory 14-day "cooling off" period when buying travel insurance, during which you can cancel without charge. You're then free to find a better-value policy (about half of all policies can be bought online, less hassle all round).

• One in eight complaints to the Financial Ombudsman relates to travel insurance. Don't be caught short when you need your cover most: know what you're buying, the levels of cover, and what is and isn't covered. Always read your documentation and take copies with you while you're away.

• When you come to book your next holiday, don't bother arguing with your travel agent, simply show him a copy of this article! Also, don't even step into a travel agent without a copy of Defaqto's travel insurance survey (PDF file, about 300k).

> More about all types of insurance