The OFT inquiry will examine whether contracts have unfair or obscure clauses or exclusions and whether consumers are receiving the sort of payouts that they might expect from policies.
The scope for mis-selling, and whether policies are appropriate to the consumers' needs, will come under scrutiny. The rapid growth in the health insurance market, worth around pounds 1.5bn, and the sheer number of products available, were among factors prompting the OFT's concern.
Although the size of the travel insurance market has not changed dramatically, the lack of transparency in policies sold was its main cause for concern, it said.
The OFT's move surprised the Association of British Insurers (ABI), which said it was unaware of a problem in this area and had seen no evidence of widespread dissatisfaction from consumers buying travel insurance.
The spokesman admitted that travel was a mass marketing product which most people buy as a package and that consumers might not necessarily be aware of what they were buying.
The ABI's code of practice, which covers the sale of insurance by all intermediaries, such as travel agents, was recently updated to highlight the importance of pointing out consumer rights, obligations and any exclusions. The ABI said the update was not related to the OFT inquiry, and was carried out as a matter of course.
Travel agents are also governed by the Association of British Travel Agents' (ABTA) own code of practice which states the importance for a travel agent or tour operator to explain all main points of coverage.
A spokesman for Abta said the onus should be on the buyer to read the policy and not on the travel agents to explain more than the main points of coverage.
It said the way forward would be to introduce a helpline for consumers so they could determine the exact extent of policies available.Reuse content