Insurance Cancellation Costs

georgerose · 17 January 2008 at 11:29AM

I thought I'd let people know about the hidden costs of cancelling car insurance. My experience has been with Budget Insurance who I took out a policy with on 1 August 2007. At the start of January I decided to cancel the policy with Budget as I no longer had the car. However, even though I had only used the policy for 5 months, they calculated I should be due just £20.07 on my policy even though the credit left on it was £144.95.

This is because they demand both a cancellation fee and a short term insurance fee. So, when their web site FAQ says "a cancellation fee will be payable" don't assume it is just the short term fee, or that it's a cancellation fee or the short term fee... it is both, yes, they charge you twice to cancel your policy. Effectively this worked out at over 86% of the balance on my policy.

Follow the saga at:
http://www.squidoo.com/consumer_power

I will let people know of their response, but personally I would say to keep well away from Budget Insurance and find an insurer with more open information on cancellation charges.

dunstonh · 17 January 2008 at 12:01PM

I thought I'd let people know about the hidden costs of cancelling car insurance.

Nothing hidden about it. What you mean is that you thought you would let people know about the costs that you hadnt read in the information that had been sent to you.

This is because they demand both a cancellation fee and a short term insurance fee. So, when their web site FAQ says "a cancellation fee will be payable" don't assume it is just the short term fee, or that it's a cancellation fee or the short term fee... it is both, yes, they charge you twice to cancel your policy. Effectively this worked out at over 86% of the balance on my policy.

Nothing wrong with that. You insure your car annually and the insurer budgets and decides premiums based on those business levels. If you want to break the contract early then it not only can impact on the insurer but also all the other policyholders as well.

I will let people know of their response, but personally I would say to keep well away from Budget Insurance and find an insurer with more open information on cancellation charges.

So you wont be using an insurer again? They all have this or they add it into the premium so its hidden away.

JennyW_2 · 17 January 2008 at 12:11PM

it's very normal to be charged. I've just cancelled my motorbike policy coz I sold the bike. I was refunded the months remaining but charged a canx fee. Totally expected.

georgerose · 17 January 2008 at 12:37PM

Ooh, that's a little bit scathing... compare Budget Insurance's cancellation FAQ with those of Swift Cover who put it in nice simple terms that if you cancel within 14 days you are charged X amount... then have a table saying exactly what percentage is refunded if you cancel your policy after driving the car.

I'm not a fool, thank you, all I was alerting people to is that the FAQ on the web site is ambiguous and doesn't state clearly enough that they charge both a cancellation fee and another fee for not being with them for 12 months.

JennyW... yes, you were refunded the months remaining but charged a cancellation fee... how would you feel if they said you were to be charged a cancellation fee, then another fee, which combined would result in pretty much getting nothing back?

dunstonh · 17 January 2008 at 1:06PM

Ooh, that's a little bit scathing

Wasnt written with that in mind. So dont take it that way.

how would you feel if they said you were to be charged a cancellation fee, then another fee, which combined would result in pretty much getting nothing back?

The other way of looking at it is how would you feel if your premiums were higher because you had to pay for other people cancelling their policies?

Cancellation fees have to be fair according to FSA rules (and this has been tested with the FOS who have got providers to alter their terms in the past) but they dont have to be pro rata. If there is a credit agreement involved then there is often an additional charge on top of the admin charge and you can often find that you get little back.

georgerose · 17 January 2008 at 1:48PM

dunstonh wrote: »

Cancellation fees have to be fair according to FSA rules (and this has been tested with the FOS who have got providers to alter their terms in the past) but they dont have to be pro rata. If there is a credit agreement involved then there is often an additional charge on top of the admin charge and you can often find that you get little back.

After looking on the FSA site, and Financial Ombudsman site I found this:

http://www.opsi.gov.uk/si/si1999/19992083.htm

Which states these as being unfair:

(d) permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract;

(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;

Under (d), would people considered that receiving just £20.07 from a balance of £144.95 is "compensation of an equivalent amount"? And under (e) would people consider the sum of £124.88 to be "disproportionately high" to cancel a contract?

lisyloo · 17 January 2008 at 2:35PM

Under (d), would people considered that receiving just £20.07 from a balance of £144.95 is "compensation of an equivalent amount"? And under (e) would people consider the sum of £124.88 to be "disproportionately high" to cancel a contract?

Challenge it then.

They will have an official complaints procedure that you can go through.
If you have no luck and are not satisfied then take it to the ombudsman.
This is all available for free (apart from stamps and time).

It costs them over £350 to go to the ombudsman so I would think your chances of them giving up before that are quite high to be honest.

Stay patient, calm and factual.

j4mieuk · 18 March 2008 at 4:55PM

I am suffering a similar problem with Budget Insurance

I took out a 1 year policy to cover a van, unfortunately I had to sell the van and cancel my insurance after 5 months. Budget were the cheapest insurer at the time of taking out my policy and the annual cost was £1487.00

When I called to cancel I was told that I would be charged £413.50 and an additional £35 as I did not take complete the full year.

The breakdown of costs are
£618.36 Time on cover (5 months)
£413.50 Short term charge
£35.00 Cancellation fee
£1,066.86 Total charge

To date I had paid £777.60 and they are insisting that I pay the difference of £289.26 to cancel the policy.

When I asked why I would have to pay to cancel I was told that its in my terms and conditions. After looking at them it is stated "you MAY be charged a percentage of the total cost of insurance if you cancel early"

I asked the call centre to clarify when I MAY not have to pay this charge and I was told "you will always be charged this fee" I then suggested that the terminology in my policy was incorrect and misleading. He agreed that it was but said there is nothing that he could do about it.

I dont mind paying the £35 cancellation fee but I feel I am being ripped off with the £289.26 charge especially now that the agent has confirmed the terminolgy is misleading.

I have complained to the Financial Ombudsman and they have contacted budget who are sticking to the charge and insist i will have to pay the £289.26.

I am going back to the FO today to tell them I am still not happy.

Is there anybody else who has had similar problems and can give any advice?

thanks

raskazz · 18 March 2008 at 5:01PM

I'm sorry but I absolutely disagree with you on the terms being misleading.

They state that you may be charged because the insurer may choose to waive the normal cancellation rates if there is good reason for them to do this. There is no reason for them to do this in this instance, hence the charge stands.

If you thought that the cancellation terms were misleading, why did you not contact them to clarify the position at inception (then if you disgreed with the terms you could enforce your cancellation rights within the 'cooling-off' period)? Or, indeed, before cancelling?

Most normal people would read that there 'may' be a charge and budget according to worst-case scenario.

j4mieuk · 18 March 2008 at 5:10PM

You may disagree but the call centre agent confirmed that they are.

raskazz · 18 March 2008 at 5:14PM

j4mieuk wrote: »

You may disagree but the call centre agent confirmed that they are.

Call centre agents are usually poorly-trained, poorly-paid, low-skill staff who will generally say anything to get a moaning customer off their back. Make of this what you will.

Whatever the call centre monkey's opinion is, in my opinion the terms are not misleading. Again, if you thought they were misleading why did you not contact Budget at inception or prior to cancellation to clarify the position?

Insurance Cancellation Costs

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