According to FSA, the new regulation which is effective January 2009 will end the long suffering by travel consumers allowing them to seek redress should they encounter any problems with their provider.

Although stand-alone travel insurance is already regulated, travel agents, tour operators, coach tour operators, airlines, ferry companies, train companies and accommodation providers often make available travel insurance connected to travel arrangements as a service for their customers, but this has previously not been regulated.

In what could be good news for travel consumers, the new rules demand that travel agencies selling insurance must have their staff trained in selling insurance.

As a result, the watchdog believes that consumers will benefit from clear, concise and consistent information about a firm's services and products on offer. This means that they will be able to make informed choices; and if things go wrong, consumers are able to obtain redress.

Dan Waters, director of retail policy at the FSA, said: “Regulation is only seven months away and firms need to make sure they are fully prepared. We start accepting applications next month and firms are advised to apply early to ensure that they are ready in good time for the start of the new regulation next January.

“Our rules are designed to put in place a proportionate, risk-based regulatory regime for these sales of travel insurance, securing protection for customers.”

Travel agents will also apply for authorisation from the regulator before they can be allowed to sell insurance. Currently travel agents were able to sell insurance without authorisation as long as policies were bundled with holidays.

However, this practise has led to claims that what is covered by insurance polices and their exclusions were not fully explained to holidaymakers. At the same time, consumers did not have the same rights when complaining.

But, a number of companies have already expressed concern over the new rules saying that that some companies could stop offering connected insurance.

Kelly Ostler-Coyle, at the Association of British Insurers (ABI), argued that the new system brought in a level playing field.

She explained that under the new travel insurance rules, consumers can truly compare insurance across the travel agents and direct from insurance companies.

She added, “People can expect the same levels of service.

“It creates a level playing field with the same levels of administration. It is also about having the same right to complain.”

According to FSA, the new rules are aimed at offering consumers better protection even when shopping for their travel insurance.

Under the new rules, promotions for insurance need to be "fair, clear and not misleading" and consumer must be treated fairly before and after sale.

Minimum standards for complaint handling will also be introduced as well as independent arrangements to review and settle any complaints at no cost to consumers.

Thomas Cook, however, said that the company will not be affected as a result of the changes announced by the regulator.

Mark Nancarrow, executive director of financial services at Thomas Cook, said: “Thomas Cook has a well-known and trusted brand name. We have been selling travel insurance to our customers for decades and have thousands of regular customers.

The company announced that it had made changes to accommodate the FSA rules and moved to reassure its customers that it will offer even better travel insurance cover.

“We have now made changes that allow us to offer our exceptional cover at even better prices. So customers can be completely confident that they are getting the best possible protection from Thomas Cook.”