Ed Balls, economic secretary to the Treasury, has said in a statement that the FSA is set to regulate
travel insurance sold with a holiday.
Mr Balls said that too many Britons are putting themselves at risk when buying travel insurance as there is a 'knowledge gap' in which they are often unaware of the full extent of cover.
"Evidence shows that companies regulated by the FSA are better at getting consumers to make an informed choice because they are better at explaining the key features and exclusions of the product and guiding the customer through the sales process," he added.
The new regulations will now be put through a period of consultation, but the economic secretary expects them to come into effect in January of 2009.
All travel insurance sold in the UK would then be done through FSA regulated companies, so that travel insurance bought with a holiday will get the same regulatory protection as stand-alone travel insurance does now.
But the FSA said it would be flexible to facilitate the transition, allowing travel firms that don't want to have FSA authorisation to sell travel insurance through some previously appointed representative.
The Treasury is also compiling a report to make sure that insurance policies are as clear to the customer as possible.
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