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July 23, 2008

Brian Kirsch:Travel insurance? Don’t panic!

The ability of event agencies to offer insurance to their clients has been one of the important issues that the Eventia Regulation Committee has tackled in the last three years. This is important because, apart from being a nice little extra source of income, it puts risk management firmly in the frame for event managers.

The first battle was to convince the Financial Services Authority (FSA) that agencies are not in the insurance business and so can continue to offer event insurance to their corporate customers, provided they do it in a certain way. 

We argued that agencies were not carrying on insurance mediation by way of business, and that they were not mediating in insurance if they were also a party to the insurance contract. The FSA accepted the logic of our arguments, so as long as we all follow the rules, event insurance can once again feature in client proposals.

Travel exemption
Then just when you thought it was safe to go outside, the Treasury decided to review the exemption on travel insurance, which was part of the original European Union (EU) Insurance Mediation Directive (IMD). This said that travel agents and tour operators didn’t have to be regulated to offer travel insurance with connected travel services. 

There was a good reason for this – if insurance wasn’t offered at ‘point of sale’,  there was a danger that too many people would travel uninsured. There is a well-developed and competitive market, so people have the choice of where they buy.

A step too far
So event agencies may have been alarmed to hear that the FSA is to start regulating the sale of travel insurance from 1 January 2009. For many in the travel industry this is a great disappointment – a decision by the Government (based on some ill-informed anecdotal evidence) to extend regulation beyond that required by the IMD. Other EU countries are not going this far, so once again our government is putting UK business at a disadvantage and loading it with unnecessary regulation.

The deliberations of the Select Committee were interesting – Mike Monk from ABTA was given the Spanish Inquisition, while representatives of consumer groups were welcomed like prodigal sons.

Some members of the Select Committee are under the impression that if you regulate a particular business activity, you make it better. But this is wrong. All it means is that if a business sells rubbish, they sell it according to the rules that the minister decided to regulate.

Like it or not…
The net result is that most of the travel industry is going to have to accept this. However, it is important for agencies not to panic, and for many in the conference and incentive travel (CIT) sector, FSA authorisation will not be necessary.

To explain, the Eventia Regulation Committee successfully argued the case and persuaded the Treasury to maintain the exemption from regulation for event management companies. This exemption applies to events they are managing for commercial customers whose annual business turnover is more than £1 million – this will be the overwhelming majority of events for corporate customers.

Experience counts

We were able to make the case because Eventia members have been providing travel insurance for their customers for the last 20 years with no evidence of consumer detriment. On the contrary, because of the special position of CIT companies, the insurance market has responded and developed products which are superior from those generally available in the market. 

So do not doubt the value of your trade association, and remember this: in each of these cases, we had the evidence and the reasoned arguments to make the case, and the FSA and HM Treasury listened to what we had to say, and I thank them for that. It takes years to achieve that recognition.

Brian Kirsch is an Eventia board member and managing director of Event Assured

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