James Daley: Why your insurance cover may not be worth the paper it's printed on

An end to the days of sharp practice by ethically corrupt insurance salesmen finally moved one giant step closer yesterday, as the Financial Services Authority extended its grasp to take responsibility for regulation of the sector.

An end to the days of sharp practice by ethically corrupt insurance salesmen finally moved one giant step closer yesterday, as the Financial Services Authority extended its grasp to take responsibility for regulation of the sector.

Before Friday, people who sold the likes of car or house insurance were not regulated, and so weren't obliged to ensure the policy they were selling was suitable for their customer. Worse still, insurance salesmen were under no obligation to point out the finickety clauses in their policies, which often meant your claim would be rejected if you ever needed to make one. The final insult would come when you made a complaint, at which point the absence of FSA regulation would mean you couldn't turn to the Financial Ombudsman Service (FOS) if you felt you'd been missold a product. Fortunately, for most types of general insurance, all this has now changed for the better.

But while the FSA's move to regulate the sector is good news, two gaping holes have been left in its regulatory net, which are certain to ensure that thousands will continue to be sold redundant insurance policies every year. After a five-minute consultation 18 months ago, during which the retail and travel industries threw a tantrum about the potential cost of insurance regulation, the Treasury agreed to let these two huge parts of the insurance sector off the hook. As a result, when you buy an insurance policy from your travel agent, or an extended warranty from your local electrical retailer, you'll continue to be afforded the same poor level of consumer protection that you always were.

The transparency of the Treasury's hollow decision has been most evident in the travel sector, where it has forced the specialist travel insurers to fall in line with the regulations, but has let off the travel agents who sell insurance as a secondary item. This is total lunacy. In reality, it is the specialists who tend to be more customer-service driven and have higher standards, while the travel agencies will try to surreptitiously slip their over-priced policies into holiday packages, often failing to warn customers of the vast list of exclusions from their cover.

The story in the extended warranty sector is equally depressing, where the warranties often cost as much as the item itself. While the Competition Commission made one small step towards tackling this issue a year ago, ensuring that retailers make warranty prices clearer, the shops still have a captive audience, most of whom are unaware they could save hundreds of pounds by shopping around. Extended warranties bought through an online specialists are often a fraction of the price you will find in your local Dixons or PC World.

Understandably, the other industries that sell insurance as a secondary product, such as motor dealers, dentists and vets, feel aggrieved that the travel agents and retailers have managed to slip through the net. And while publicly, the FSA can only support the Government's decision, its management must be frustrated that its authority has been undermined by such inconsistent policy.

Although the power of the retail and travel lobby clearly packs a punch in the halls of Westminster, a properly motivated consumer lobby can beat both of them hands down. Until the Treasury concedes to level the playing field, however, consumers must continue to be super-vigilant when buying insurance.

* IT WAS heartening to hear this week that the Competition Commission plans to persist with its inquiries into the store-card industry, and has acknowledged that providers are gaining to the detriment of consumers. Despite coming under pressure over the past 18 months to reduce their extortionate rates and to make their terms and conditions clearer, few retailers have made any changes at all. A recent Which? survey revealed that credit on the high street is easy to access, and that shop staff very rarely warn shoppers about the small print. More needs to be done to ensure that shoppers know they can get much better rates of credit elsewhere. If this were common knowledge, surely people would not sign up so quickly to rates of 30 per cent a year.

Finally, financial education for the future

After seven years of dudgovernment savings initiatives, I sometimes find it hard to be positive about anything new from the Treasury. But although it has its pitfalls - and may have been driven more by the political capital it buys than the social outcome it will deliver - I can't help feeling that the child trust fund is a genuine step forward in the battle to financially educate Britain. The fact that every child born since September 2002 will grow up with a savings pot has huge potential to help future generations start understanding money at an early age.

Much has been written about Britain's savings apathy over the past few months, as evidence has shown that fewer people are taking financial responsibility for their future. A large part of this is undoubtedly down to lack of understanding, and lack of adequate financial education at a young age. The child trust fund can help to change this.

My only worry is that initial indications are that the majority of parents will put their children's money into cash savings accounts, which is almost certain to ensure their pot grows much slower than it could. Having recently made mistakes in its advice over the safety of occupational pensions, the Government is reluctant to push people towards equities. But it is encouraging that it has at least been bold enough in its CTF literature to inform parents that equities have outperformed cash during every 18-year period for the past four decades. When your CTF pack arrives next week, think long and hard about where you put your child's money.

j.daley@independent.co.uk

Start your day with The Independent, sign up for daily news emails
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
news
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Jemma Gent: Year End Accountant

    £250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

    Jemma Gent: Management Accountant

    £230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

    Day In a Page

    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?
    How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

    Time to play God

    Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
    MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

    MacGyver returns, but with a difference

    Handyman hero of classic 1980s TV series to be recast as a woman
    Tunnel renaissance: Why cities are hiding roads down in the ground

    Tunnel renaissance

    Why cities are hiding roads underground
    'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

    Boys to men

    The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
    Crufts 2015: Should foreign dogs be allowed to compete?

    Crufts 2015

    Should foreign dogs be allowed to compete?
    10 best projectors

    How to make your home cinema more cinematic: 10 best projectors

    Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
    Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

    Manchester City vs Barcelona player ratings

    Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
    Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

    Monaco: the making of Wenger

    Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
    Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

    Chris Gayle: The West Indies' enigma

    Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
    In Ukraine a dark world of hybrid warfare and murky loyalties prevails

    In Ukraine a dark world of hybrid warfare

    This war in the shadows has been going on since the fall of Mr Yanukovych
    'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

    Homage or plagiarism?

    'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
    Broadchurch ends as damp squib not even David Tennant can revive

    A damp squib not even David Tennant can revive

    Broadchurch, Series 2 finale, review
    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

    Inside the mansion of Germany's 'Bishop of Bling'

    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower