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Car insurance cancellation fees Robbery!
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# 1
legalisedrobbery
Old 11-02-2008, 1:28 PM
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Talking Car insurance cancellation fees Robbery!

Hi everyone,

Sold my car, tried to cancel the policy today. They said they were going to charge me a hefty 35 cancellation fee and then charge me an extra 21 on top to make up for the policy ending early . My policy costs 8.50 per month! My question is:

Is this fair trading?
Can they legally do this to me?
It wouild be cheaper for me to run the remainder of the policy on a car I don't own - is this OK?

They say, rather arrogantly, that its written in the fine print of my policy and that I cannot do anything about it!

Also would just stopping the DD from me bank account be OK?

Any help would be appreciated!

Thanks, Pete.
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# 2
Quentin
Old 11-02-2008, 1:51 PM
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You agreed to the ts + cs when taking out the policy - or they will have given you time to check them and cancel if you weren't happy. So it is down to you not bothering to check.

If you stop your dd then they will just pursue you for the money by billing you, then their normal debt collection procedures if you don't pay. So the benefit of stopping the dd is you will have more time to pay - though check that they aren't allowed to pass on extra charges for payments by other means than dd.

You say it's robbery. You should report robbery to the police.
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# 3
tonydee
Old 11-02-2008, 1:52 PM
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I would ask for a breakdown in the administrative costs and then ask them to justify why it costs so much. Mumble the words fair trading and ombudsman and they may reduce it.
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# 4
dunstonh
Old 11-02-2008, 1:53 PM
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Quote:
They said they were going to charge me a hefty £35 cancellation fee
£35 is not hefty. Anything upto £50 is considered reasonable.

Quote:
Is this fair trading?
yes.

Quote:
Can they legally do this to me?
yes.

Quote:
It wouild be cheaper for me to run the remainder of the policy on a car I don't own - is this OK?
yes.

Quote:
Also would just stopping the DD from me bank account be OK?
If you don't mind defaulting on a credit agreement and having the consequences of that showing on your credit file.

This subject is a bit of an FAQ and we get new threads on this about twice a week. You may wish to read back on old threads for a bit of background. However, in summary, the fee is fair as you are cancelling an annual contract mid term. The provider has priced their product on 1 year of cover but you are asking them to amend those terms. That involves an admin fee now to pay for the time and cost of making the amendment and a cancellation charge to reflect their lower profit.

The FOS has had complaints about these fees in the past and anything upto £50 is considered acceptable. The refund charge has to be justified within reason. That doesn't mean they have to give pro rata refunds (i.e. 6months means half your premium back). They can add up two months typically. Anymore than that and it would likely be considered unfair. Although it can depend on where you are in the policy year when you are cancelling.

Quote:
I would ask for a breakdown in the administrative costs and then ask them to justify why it costs so much. Mumble the words fair trading and ombudsman and they may reduce it.
Why should they have to break it down? There is no requirement for them to do so and they are unlikely to do so. Mumbling the words fair trading and ombudsman are not likely to scare them as the FOS has ruled on cases like this before and published its outcome in the monthly briefings. So any firms charging within those tolerances know the FOS is going to rule in their favour (hence the under £50 being mentioned).
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.

Last edited by dunstonh; 11-02-2008 at 1:56 PM.
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# 5
tonydee
Old 11-02-2008, 2:03 PM
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Quote:
Originally Posted by dunstonh View Post

Why should they have to break it down? There is no requirement for them to do so and they are unlikely to do so. Mumbling the words fair trading and ombudsman are not likely to scare them as the FOS has ruled on cases like this before and published its outcome in the monthly briefings. So any firms charging within those tolerances know the FOS is going to rule in their favour (hence the under 50 being mentioned).
Well theres no harm in asking is there.

Challenge it and be polite, afterall this is a moneysaving website :rolleyes:
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# 6
lisyloo
Old 11-02-2008, 3:55 PM
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Quote:
Well theres no harm in asking is there.
I think you are right Tony.
If you write a letter in your spare time it costs you nothing except a stamp and an envelope.
On the other hand they have to pay someone to deal with your complaint.

There is a chance that they may waive or reduce the fee as a "gesture of goodwill" (which means they will never admit to being wrong).

However they might also say no on the grounds of precedent.

But I'm with Tony on this one - there's no harm in trying.

I also agree with dunstonh in that you don't have a leg to stand on.

Cancelling a DD for a contract you agreed to is a bad plan IMO.
If you get a bad credit record then this will haunt you for 6 years plus, so really not worth it.
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# 7
Steve1981
Old 12-02-2008, 8:49 AM
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Quote:
Originally Posted by tonydee View Post
I would ask for a breakdown in the administrative costs and then ask them to justify why it costs so much. Mumble the words fair trading and ombudsman and they may reduce it.

Under the FSA guidelines Insurers are obliged to give you cancellation fees for motor insurance when you take the pol, as said you get 14 days if you dont agree with the terms and conditions to cancel (provided no claims are made) outside of that the cancellation fee will stand
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# 8
tonydee
Old 12-02-2008, 8:56 AM
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Quote:
Originally Posted by Steve1981 View Post
Under the FSA guidelines Insurers are obliged to give you cancellation fees for motor insurance when you take the pol, as said you get 14 days if you dont agree with the terms and conditions to cancel (provided no claims are made) outside of that the cancellation fee will stand
I did say they may reduce it.

By challenging it, Mr Nice Insurance Man may say, ok we'll waiver it this time.

For the record I also think the FSA are wrong to think that anything over 10 is fair when it comes to a simple admin change. It'll probably take the operative about 5 minutes to complete.
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# 9
Steve1981
Old 12-02-2008, 9:24 AM
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Quote:
Originally Posted by tonydee View Post
I did say they may reduce it.

By challenging it, Mr Nice Insurance Man may say, ok we'll waiver it this time.

For the record I also think the FSA are wrong to think that anything over 10 is fair when it comes to a simple admin change. It'll probably take the operative about 5 minutes to complete.

it will take nearer 2 minutes mate, most companies now charge one month as the cancellation fee, so those with higher premiums are being hit harder

it might be worth checking if you can suspend the policy, you keep paying for the policy and when you get a new car you can do a change of car, this way you keep building your bonus (this is only really worth looking at if you dont have maximum ncd)
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# 10
lisyloo
Old 12-02-2008, 9:27 AM
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Hi Tony,

You are not just paying for 5 minutes of someones time you are paying for your share of the following:

staff time
their pension
their tax & NI
time off e.g. sick, holidays
their training
their manager
their desk & chair
hardware
software
rent
electricity
employers NI
employers liability insurance
paper, stamps, ink & printers
costs of storage of paper, stamps, ink & printers
costs or ordering paper, stamps, ink & printers
share of costs of daily royal mail collection
their share of payroll costs
their share of office cleaning costs
their share of kitchen equipment costs
their share of health & safety costs e.g. provision of fire extinguishers
their share of training for fire marshals and first aiders
their share of hygiene provsision e.g. paper towels, loo roll, sanitary disposal
admin costs for processing your payment
fees e.g. visa for your payment
time off for company meetings
time off for fire drills
share of business rates
etc.

If you don't agree with the charges imposed by one company then don't use them, find another one.
You can find all the info for free on the net or if you want to save yourself some time try www.matthewsguide.co.uk

Companies are run to make profits and the insurance companies or other customers do not want to subsidise the costs of your admin changes.
Please don't think I'm being nasty. I'm just telling you the facts of how things are.
If you don't like a product then don't buy it. It's simple.
Obviously you have to weigh that up against cheap permiums.
Personally if I was getting a really great premium then I woulnd't mind paying a bit more for admin, but if you don't like it then go elsewhere.
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# 11
Steve1981
Old 12-02-2008, 9:31 AM
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Something I forgot - you cant continue to run insurance on a vehicle you no longer own - you have no insurable interest
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# 12
Tozer
Old 12-02-2008, 9:37 AM
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Quote:
Originally Posted by Steve1981 View Post
Something I forgot - you cant continue to run insurance on a vehicle you no longer own - you have no insurable interest
True but as you won't be making a claim, there is no loss to anyone.
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# 13
lisyloo
Old 12-02-2008, 9:42 AM
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True but as you won't be making a claim, there is no loss to anyone.
Go careful here.
I did read (may well have been on these boards) that someone had an accident and had no insurance, so it came back to the previous owner as they had insurance in place.

Might be a very small risk, but it still exists.
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# 14
dunstonh
Old 12-02-2008, 9:49 AM
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For the record I also think the FSA are wrong to think that anything over 10 is fair when it comes to a simple admin change. It'll probably take the operative about 5 minutes to complete.
As lisyloo points out, the transaction itself maybe cheap but the costs involved in allowing that transaction to be done are not.

The FOS publication made it clear that the company bases their premiums on 12 months of cover and that premium covers their costs and gives a profit. If the insurance doesnt last 12 months then the insurer may not cover costs and make a profit and is therefore justified in making a charge to offset that.

Its not just the costs at point of cancellation but the setting up costs as well.
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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# 15
Tozer
Old 12-02-2008, 11:02 AM
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Originally Posted by lisyloo View Post
Go careful here.
I did read (may well have been on these boards) that someone had an accident and had no insurance, so it came back to the previous owner as they had insurance in place.

Might be a very small risk, but it still exists.
Can't see how this would work as if the previous owner had not been negligent then there would be blame for a claim to attach to. Insurance only indemnifies the policyholder and does not run with the car - hence if I sold you my car, you would not have my insurance policy as well.
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# 16
lisyloo
Old 12-02-2008, 11:26 AM
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I will see if I can find the post for you but I'm sure I didn't dream it.

EDIT: Sorry I can't find the post but what raskazz is saying below is ringing a bell.

Last edited by lisyloo; 12-02-2008 at 2:41 PM.
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# 17
raskazz
Old 12-02-2008, 2:20 PM
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Originally Posted by Tozer View Post
Can't see how this would work as if the previous owner had not been negligent then there would be blame for a claim to attach to. Insurance only indemnifies the policyholder and does not run with the car - hence if I sold you my car, you would not have my insurance policy as well.
This is incorrect. Whilst a certificate of insurance is out there for the car, if the new owner does not insure the car then the insurer is still exposed to Road Traffic Act liabilities or 'Article 75' liabilities. So if the insurer is forced to pay out under either, it is within its rights to recover any costs from the policyholder - who has been negligent and breached the policy conditions by not informing the insurer of the sale - or the driver responsible.

The car will also be showing as correctly insured on the Motor Insurance Database, when it may not actually be insured by the new owner.

Last edited by raskazz; 12-02-2008 at 4:10 PM.
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# 18
Steve1981
Old 13-02-2008, 8:33 AM
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Originally Posted by raskazz View Post
This is incorrect. Whilst a certificate of insurance is out there for the car, if the new owner does not insure the car then the insurer is still exposed to Road Traffic Act liabilities or 'Article 75' liabilities. So if the insurer is forced to pay out under either, it is within its rights to recover any costs from the policyholder - who has been negligent and breached the policy conditions by not informing the insurer of the sale - or the driver responsible.

The car will also be showing as correctly insured on the Motor Insurance Database, when it may not actually be insured by the new owner.
also take in to consideration that most insuers when giving you a policy number state "it is your responsibility to inform us of any changes that may affect the policy" the vehicle being kept at a different address= different risk, so its possible they may try and get out of paying out under non-disclosure, if this happens you could get stumped with the bill.

if its not cut & dried then obviously some insurers will do their best to avoid paying out.
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# 19
Tozer
Old 14-02-2008, 10:12 AM
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Originally Posted by raskazz View Post
This is incorrect. Whilst a certificate of insurance is out there for the car, if the new owner does not insure the car then the insurer is still exposed to Road Traffic Act liabilities or 'Article 75' liabilities. So if the insurer is forced to pay out under either, it is within its rights to recover any costs from the policyholder - who has been negligent and breached the policy conditions by not informing the insurer of the sale - or the driver responsible.

The car will also be showing as correctly insured on the Motor Insurance Database, when it may not actually be insured by the new owner.
Sorry but that isn't right. Section (not article) 75 of the RTA is a method by which the insurer cannot decline third party cover on the basis of a vitiating element in the contract of insurance. If the policy holder has not been negligent then there is no liability for the policy to attach to.
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# 20
raskazz
Old 14-02-2008, 3:38 PM
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Sorry but that isn't right. Section (not article) 75 of the RTA is a method by which the insurer cannot decline third party cover on the basis of a vitiating element in the contract of insurance. If the policy holder has not been negligent then there is no liability for the policy to attach to.
Erm, it is right and unfortunately you have totally misunderstood my post in a way that belies your lack of understanding.

Article 75 is not a section of the Road Traffic Act (hence why I wrote Article 75 not Section 75), it is one of the Motor Insurers' Bureau's Articles of Association.

The relevant parts of the Road Traffic Act are s. 147, 148, 151 and 152 IIRC. I suggest you read them and digest them before you reply.

Last edited by raskazz; 14-02-2008 at 3:51 PM.
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