Personal Finance: Holidaymakers are paying millions in excessive travel insurance premiums

WHAT WOULD you think of an electrical goods store which tried to tell you that the fridge you want may not be available unless you buy a warranty to go with it? Or that it wants to check any household policy you have to see whether the fridge is protected under its terms.

The warranty, by the way, covers parts but not labour, and it costs at least twice the price of any comparable warranty sold elsewhere. The reason is that the store doesn't want you to walk out of the shop without knowing that if anything were to happen to your fridge it could be fixed immediately.

Somehow, I suspect that were you treated in such a manner you would refuse to set foot in that electrical goods store ever again. Strange then, that up to 10 million holidaymakers are likely to come under pressure from tour operators to buy their travel insurance in preference to perfectly adequate (and much cheaper) cover available from a proper insurance company.

Things used to be even worse, by the way. Up until November last year, a travel operator could actually refuse to sell you the holiday. That changed after the Government acted to stop so-called conditional selling of cheap holidays.

Despite the introduction of Government rules preventing this, a survey by Direct Line insurance reveals that, of those who booked both a holiday and insurance with an agent since November, 40 per cent were "coerced".

All the operators make insurance a condition of booking. Most of them insist on being given details of the other cover. The alternative policy must be "at least as good" as theirs.

Repatriation and medical cover are cited as key reasons for insurance. Yet almost six out of 10 people who took out cover through the travel company were not asked about any medical conditions which could negate their insurance.

Eight out of 10 people were not asked if they were planning adventurous activities which, again, might negate their cover. More than 20 per cent were simply handed the written policy without any explanation.

If a travel operator's policy was so fantastic, then you might say: so what?

If anything, the reverse is true. Take a 14-day holiday to Europe for two people. The prices charged by Direct Line is pounds 40-odd. Actually, that's not necessarily the best available deal, but let that pass. But Thomas Cook stings you for pounds 79, Cosmos charges pounds 73.80, Thomson levies pounds 84, while Airtours takes an amazing pounds 86.

Clearly, despite an earlier investigation by the Monopolies and Mergers Commission, rules are being flouted by the travel industry. Holidaymakers are paying millions in excessive premiums. Time for the Government to act again.

LAST WEEK we published a story in which a Swinton Insurance policyholder found that the company refused to belong to any of the insurance industry's arbitration schemes. This week, I am pleased to say that following The Independent's intervention, the company has offered the person concerned pounds 1,000 in full settlement of his claim. The offer has been accepted.

Why is it necessary for The Indie to step in for someone to be offered compensation? Why won't Swinton belong to any arbitration schemes? And should anyone take out a policy through a company which openly challenges its policyholders to go to court if they are in dispute with it over their cover?