What happens if we book holidays to a country currently green, then it changes to amber or red. Are travel agents and tour operators going to allow cancellation with full refund, free amendments to another destination, and if a country changes colour whilst we are out there, are they going to bring people back immediately. Importantly will the refunds be instant and not months down the line like they currently are? Can anyone (perhaps from an insurance company) advise how a country going from green to either amber or red will effect insurance cover?
This traffic light system seems to be going to cause more problems.

Short answer, No. Everything will be based on FCO advice as it always has been.

The fundamental question remains why the UK Government did not impose a traffic light system back in March at the start of the Coronavirus Lockdown. Will they apply it retrospectively to those high risk countries that are classified as red such as USA, Brazil, Mexico and China?