New rules have come into force that will impact on businesses who offer or arrange travel insurance to consumers online. From 1 January 2009 all companies such as travel agents, tour operators, airlines, rail and ferry operators, which arrange, advise or administer travel insurance alongside either a holiday or other travel arrangements (connected travel insurance (CTI)) will require authorisation from the Financial Services Authority (FSA) or have to fall within an exemption. "Arrange" is broadly defined by the FSA and can bring a range of online activities into the scope of registration.
From 1 January 2009 online businesses who make such arrangements or sell travel policies should have become:
- directly authorised by the FSA; or
- registered as an appointed representative or introducer appointed representative (IAR) of a FSA authorised firm (i.e. an insurer); or
- an unregulated Introducer making only limited information available.
This means that many internet travel businesses that have never been subject to financial regulation and who decide to get direct authorisation will be subject to the new rules and unless exempt, will have to show that they meet regulations, including rules, in relation to treating customers fairly and providing appropriate information; giving redress to customers through the Financial Ombudsman Scheme, if things go wrong. Providers who decide to obtain FSA authorisation will also have to dedicate internal resources and train staff in order to engage in regulated activities.
Appointed representatives are not themselves regulated by the FSA, but indirectly regulated by contracting with their principal (e.g. the insurance company/broker that they are selling on behalf of). The principal takes regulatory responsibility for the appointed representative's actions and ensures they meet FSA requirements, through a written contract with the appointed representative.
Introducer appointed representatives are also contracted through a principal, but can only provide limited information and pass customer details on to the principal they have contracted with and are not able to advise or aid customers with the filling in of insurance forms. Again, there is usually a written contract between the authorised firm and the IAR.
Unregulated introducers can only give generic information regarding CTI. They usually cannot pass on customer details to insurance providers.
Arranging, advising or administering CTI without the authorisation of the FSA, or without a valid exemption is a criminal offence.