The UK economic secretary to the treasury, Ed Balls, has announced that the government has handed the UK Financial Services Authority sole responsibility for regulating the selling of travel insurance sold along with holidays and flights.

At present, the UK Financial Services Authority (FSA) only regulates travel insurance that is sold independently, as well as other general insurance products.

Mr Balls said: 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.

I have therefore decided to make all travel insurance policies sold in the UK to be done through FSA regulated companies. This will come into effect from January 2009, following a further period of consultation. Consumers in the future buying travel insurance sold alongside their holiday will get the same core regulatory protection and rights as consumers buying stand-alone travel insurance do now, Mr Balls continued.

According to Mr Balls, the FSA will implement this change in a principles-based and proportionate way, minimizing the burden on those travel firms that do become FSA-authorized. However, travel companies that wish not to seek FSA authorization will still be able to sell travel insurance, but only on behalf of an FSA regulated company.

The treasury will implement the new structure in a transitional way, giving the FSA and the industry time to adapt to the new regulatory environment.