Travel agents who sell insurance with holiday packages will be regulated by the Financial Services Authority (FSA), the Government said. Ed Balls, the Treasury Minister, said that from 2009 travel agents and tour operators will have to seek authorisation from the FSA or become an appointed representative of an authorised insurer or broker before they can sell travel insurance.

Which?, the consumer group, published a report last year which found that policies sold by First Choice, Going Places and Thomas Cook were more expensive and less suitable than those sold by insurers.

Mr Balls said: “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.” The Association of British Travel Agents said that some travel agents may stop selling insurance as a result.