Connected travel insurance ("CTI") is travel insurance sold alongside a holiday or other related travel. It is exempted from regulation under the Insurance Mediation Directive ("IMD") and has been exempt from FSA regulation until now. Following criticism that many holidaymakers were buying cover that did not properly protect them, the Treasury carried out a review of the sale of CTI in 2006 and 2007 and, as a result, decided to bring CTI within the ambit of FSA regulation. The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2007 (SI 2007/3510) came into force on 30 June 2008. The removal of the exemption will affect a market which was worth around GBP£670 million in 2006.

The statutory objectives concerning the FSA in relation to the regulation of CTI are:

  • securing the appropriate degree of protection for consumers, and
  • promoting public understanding of the financial system.

The FSA has implemented a lighter touch regulatory regime compared to the regulation of other insurance products, in the belief that this will be sufficient to achieve these statutory objectives.

The FSA started to accept authorisation applications from firms providing CTI from 30 June 2008 and the new regime will come into force from 1 January 2009. There is a transitional period available, which allows a firm whose application for authorisation is still being processed to be able to sell travel insurance after the commencement of the new regime. The exemption from regulation available to event management firms (for commercial customers) and car hire firms in respect of sales of CTI will remain as, during the review, the FSA did not find any evidence of consumer detriment as a result of these sales.

For the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2007 please click here: http://www.opsi.gov.uk/si/si2007/uksi_20073510_en_1