Money: Sun, sea and exploitation

Most of us are still paying too much for holiday cover despite new laws that should make it cheaper, writes Stephen Pritchard

Sixty per cent of holidaymakers still buy their insurance from travel agents or tour operators, according to research due to be published next month. This is despite premiums that can be four times higher than the charges from an insurance company or broker.

The cost of medical treatment, repatriation or replacing stolen belongings abroad can run to hundreds, if not thousands, of pounds. This means that travel insurance is far from an optional extra. In fact, many tour operators insist that holidaymakers have some form of travel insurance before allowing them to travel.

This, insurance companies suggest, puts undue pressure on travellers to take out insurance when they book. Travel agents argue, however, that if their insurance was such a bad deal, far fewer people would buy it.

Since November last year, travel agents and holiday companies have faced legal restrictions on the way they sell travel insurance. It is now illegal to make taking travel insurance a condition of a discount on the holiday. Yet discontent about the way travel companies sell insurance has not gone away.

Direct Line, the insurance company, believes that "anti-consumer and anti-competitive" practices still abound. In March, the company carried out a survey which found that 40 per cent of holidaymakers taking out a travel agent's or tour operator's insurance felt coerced into the decision.

Direct Line's survey found that slightly more travellers - 42 per cent - took "free" insurance from the agent or travel firm. Travel insurance companies say that this cover is not free at all: its cost is met by lower discounts on the price of the trip. According to Direct Line: "The offer of free travel insurance is a scam: it is simply a marketing gimmick to circumvent the legislation."

The discrepancies between travel companies' prices and insurance companies' policies are far from trivial. Direct Travel Insurance, a travel cover specialist, quotes pounds 30 for a one-week trip to Spain for two adults and two children. Lunn Poly charges pounds 133.31 and Thomas Cook pounds 140.80.

Over the past few years, the market for travel insurance has become fiercely competitive. Travellers, though, still seem happy to buy insurance with their holidays. Convenience is one explanation. Travel insurance - even the expensive variety - is a relatively small part of the total cost of a holiday. Holidaymakers may also feel more comfortable with a company they know. Anyone travelling abroad, especially with a family, will be receptive to the argument that they need "quality" travel insurance.

ABTA, the Association of British Travel Agents, says that travellers should look at the total cost of the holiday. "Insurance is as much a part of the price as the holiday itself," says a spokesman. "If you don't like the look of it, go to someone who offers a different deal."

The cheapest way to buy travel insurance is as an annual policy. Family annual cover is especially good value. A worldwide annual policy from the cheapest insurers - such as AA Travelsure, Boots or Direct Travel Insurance - costs less than insurance for a single trip for two weeks to Spain.

Even among annual policies, there are star buys and expensive deals. American Express charges a few pence over pounds 250 for a family policy; Thomas Cook's price is pounds 236. Barclaycard charges pounds 160; Direct Line pounds 138.91 and Direct Travel, pounds 95.

But it isn't easy to make comparisons: insurers differ, even on their notions of a family. Other aspects of cover differ too. Policies with high or upper limits for medical cover seem generous, but groups such as the Consumers' Association have calculated that pounds 5m is enough, even in North America. Paying for more is likely to be a waste of money. Travellers also need to be careful about clauses excluding pre-existing medical conditions. Holidaymakers can also be caught out by exclusions and cover limits in other parts of policies. Policies often charge extra for winter sports or other adventurous activities such as scuba-diving. Some annual family policies do not cover independent travel by anyone other than the policy holder, which can make them poor value. And gadget fanatics need to look carefully at the single item limit for valuables: cheaper policies can have limits of a few hundred pounds for cameras, camcorders or sporting equipment.

n Contacts: American Express, 0800 700737; Barclaycard, 0870 840 8000; Boots, 0870 010 2020; Direct Line, 0181-680 2121; Direct Travel Insurance, 01903 812345; Thomas Cook, 0870 909 0413.

POLICIES COMPARED

Annual travel insurance premiums

Insurer Single adult Family (2 adults,

min 2 children)

American Express pounds 176.35 pounds 250.35

Barclaycard pounds 112.00 pounds 160.00

Direct Line pounds 79.51 pounds 138.91

Direct Travel

Insurance pounds 70.00 or pounds 95.00 pounds 95.00 or pounds 125.00

Thomas Cook pounds 99.00 pounds 150.00

Source: Direct Travel Insurance

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