In future, holidaymakers should get greater protection when they buy their travel insurance through a travel agent.

The changes follow accusations from consumer groups that holidaymakers are routinely sold overpriced and unsuitable insurance by travel agents.

About a third of travel policies are sold alongside a holiday. But such bundled policies are often expensive - sometimes as much as four times the price of stand-alone cover.

An investigation by the Treasury has also revealed that policies sold through travel agents do not always provide adequate cover: about 10 million Britons who travelled abroad last year were not properly insured for medical expenses or for terrorist attack. Ed Balls, economic secretary at the time, said: “Some people are putting themselves and their families at risk by buying travel insurance that may not cover their needs.”

Which?, the consumer campaign group, also conducted research last year and found that, not only are travel agents’ policies generally more expensive, they also don’t follow basic sales procedures.

None of the agents visited followed all three of the procedures that would help ensure policies are suitable - explaining what is covered, making clear what is excluded or asking about pre-existing medical conditions.

The government has therefore decided that bundled travel policies will be regulated by the Financial Services Authority (FSA) from 2009, after further consultation. The FSA already regulates stand-alone travel insurance, as well as general insurance.

Balls believes it will afford consumers greater protection. He 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.”

Travel agents who sell insurance will in future have to establish that it is suitable for the holidaymaker. They will have to comply with FSA rules on treating customers fairly and consumers will have recourse to the Financial Ombudsman Service if they want to make a complaint.

Direct Line welcomed the Treasury announcement. Its own research has found evidence of mis-sold policies, in part due to poorly trained agents.

It also uncovered evidence of misleading, high-pressure sales techniques, with one in six holidaymakers told - wrongly - that they would be unable to travel unless they took out insurance with the travel agent.

Chris Price, head of Direct Line Travel Insurance, said: “We welcome the news that the FSA is to regulate travel insurance offered by travel agents and tour operators to help protect holidaymakers from paying too much and often being underprotected.”

But Richard Mason, director of insurance at moneysupermarket.com, is disappointed that consumers will have to wait so long for the greater regulatory protection. He said: “I welcome the changes with open arms, but it seems an excessively long time for consumers to wait. Ultimately, the trick with travel insurance is to shop around for the right level of cover for you, at the right price.”