Is it normal for insurance broker to charge cancellation fee?

tony_baduk

I'm looking to get some life insurance but the broker I am dealing with, say that if the policy is cancelled within the first 4 years, the broker will charge me £200 admin costs.

Is this normal?

The broker is www.bestdealinsurance.co.uk - anyone used this company before?

They're offering a very good rate.

dunstonh

I'm looking to get some life insurance but the broker I am dealing with, say that if the policy is cancelled within the first 4 years, the broker will charge me £200 admin costs.

Is this normal?

It is acceptable and probably quite good value. The FSA call it customer agreed remuneration. It works best on pensions and investments as it removes any potential for bias as well as usually being cheaper.

However, in this case, it means the adviser has a greed a £200 fee with you and your choice is to pay £200 by cheque and have the business on nil commission basis or pay nothing but the adviser takes £200 of commission. As providers have a 4 year clawback that is why they are saying you should pay pro rata.

However, if the adviser is taking full commission and going to charge £200 on top of that if you cancel then tell them to take a hike. That is not customer agreed remuneration and is a rip off.

koexelek

I'd very much surprised if they were doing nil commission and £200 fee, otherwise they would surely take the £200 up front ?

I would guess they were taking full commission, and are using the £200 as a threat to stop the client canvelling it during clawback period.

For the unititiated, a lot of insurance companies pay an adviser commission up front.... for example, on a £30pm premium, they might pay £600 commission. However, if the customer cancels during the early years, they will take some of that commission back ( on a pro rate basis)

dunstonh

I'd very much surprised if they were doing nil commission and £200 fee, otherwise they would surely take the £200 up front ?

Not if its on customer agreed remuneration as part of a fee agreement.

Although I fear it may be a threat as CAR is more common on investment linked contracts rather than life.