COMMENT
Heading Off? Avoid The £235m Rip-Off!

I envy those people who are going skiing this winter. A week or two zooming over snow-capped mountains is miles better than trudging through an over-crowded London in the pouring rain! I first went skiing in my early thirties, and got the skiing bug in a big way.

One thing that I always buy when going on a skiing trip – or any other holiday – is travel insurance (with winter sports cover for skiing, naturally) . In my opinion, you'd be mad to go abroad without this protection. At the very least, it prevents minor problems from turning into disasters. However, I'd recommend never buying travel insurance from a tour operator or travel agent – and here's why:

In June 2004, leading independent financial researcher Defaqto analysed over five hundred different single-trip and annual travel policies, plus two hundred variants, from over 165 different sources. It concluded that we spend around £600m a year on travel insurance, but holidaymakers who buy policies from tour operators or travel agents are being ripped off to the tune of £235 million a year. Blimey!

Travel insurance is widely available, from sources such as tour operators, travel agents, insurance brokers, banks and building societies, supermarkets and other retailers, plus direct from insurance companies. However, in Defaqto's own words, "[there is] a massive price differential between policies sold by travel agents/tour operators and those sold by the rest of the market". Put another way, travel companies are the worst companies to approach for travel insurance.

For example, the premium charged for single-trip policy covering one adult for a seventeen-day European holiday varies between £9.95 and £35, which is over 3½ times as much! For a family policy, prices between leading providers vary between £22 and £139.96 – almost 6½ times as much. Yikes!

Defaqto ranked travel insurance providers according to their overall pricing, as follows:

1. Tour operators (Most expensive)
2. Banks
3. Retailers
4. Travel Agents
5. Brokers
6. Direct (Cheapest)

It's worth noting that most travel firms charge high premiums for distinctly inferior policies and, even when they do offer very good levels of cover, they do so at sky-high prices! Defaqto estimates that, thanks to high-pressure selling tactics that sometimes border on extortion, three out of five holidaymakers (60%) buy their cover from travel agents and tour operators. Groan...

The good news is that, from 14 January 2005, City regulator the Financial Services Authority takes over the regulation of general insurance products, including travel insurance. Although tough new rules should improve the selling of these products, you'd be wise to continue to avoid insurance policies from travel firms.

Finally, Defaqto believes that these policies offer the best combination of cost and cover:

More: Get a quote for travel insurance from our Insurance centre.