On the trail of 'under cover' agents

If You book your holiday through a travel agent don't be surprised if it tries to get you to take out travel insurance as well. In fact, don't be surprised if it is a condition of the holiday discount, writes Steve Lodge.

A common claim is that travel agents make more from selling insurance than they do from holidays. And some policies can seem expensive - pounds 100- plus for a fortnight's holiday in Europe for a family of four.

This conditional selling does not have to be a problem. The overall deal (holiday plus insurance) might still be good value and may even be a convenient way of getting cover that you might otherwise forget.

However, many of these policies can be twice the price of insurance bought separately. There are also concerns that travel agents do not know what a policy covers or fail to explain its limits, for example, leaving holidaymakers assuming they are covered for a sport when they are not. Travel insurance policies are notorious for their "small print" and exclusions.

The travel insurance market is worth around pounds 400m a year. Perhaps 10 million people will buy a policy this year, most linked to a particular holiday.

The Office of Fair Trading (OFT), the Insurance Ombudsman and the Consumers' Association have all raised questions about this stranglehold and its potential shortcomings. "Buyers are in the hands of those selling, more so than for perhaps any other type of insurance," says a spokesman for the Ombudsman.

The OFT, in its long-expected report, may ban conditional selling. But there are already competitive moves under way.

As many as 2 million people hold annual policies - covering any number of shorter trips for as little as pounds 80 - and this is the fastest growing part of the market. Direct Line has started selling low-cost travel insurance to its existing customers, although it will be some months before it offers the policies publicly. And last month saw the launch by WorldCover Direct of the first policy priced according to the exact number of days and specific country(s) visited.