The Financial Services Consumer Panel has called for a centralised European compensation fund to be set up.
Speaking at a Treasury select committee meeting on the EU single market in financial services, FSCP chairwoman Ann Foster complained that the EU's Financial Services Action Plan actively excludes consumers.
Foster wants to see more measures put in place to protect UK consumers buying in mainland Europe but did not suggest ways of funding a scheme.
She expressed concerns that consumers' needs have not been factored into the action plan. She said there is too much duplication of regulation and not enough focus on consumer protection.
Which? senior policy adviser Mick McAteer said further integration will bring little benefit for consumers and predicted the possibility of a pan-European misselling problem.
FSCP panel member Paul Salvidge said he does not believe UK consumers are aware of the risks of buying abroad, adding there is no EU obligation for member states to have compensation funds for insurance company failures.
Foster said: “What about establishing an EU fund to protect consumers?” McAteer said: “Just because there is a proliferation of choice does not mean this is a good quality choice. This is what we tell the Treasury.”