Cancellation charges - same as bank charges?

chirpchirp

I've just cancelled my building insurance and have been charged £44 for doing so. I'm wondering whether this is proportionate to the amount of work involved in cancelling a policy and why the amount differs depending on how long you have held the policy. I'm not arguing that I shouldn't have been charged anything what I'm wondering is whether such charges should be challenged in the same way that bank charges have been challenged. Do you think there is a case for this?

dacouch

They are not the same as bank charges as a bank charge is a penalty for sending a letter which costs a nominal amount.

With Insurance you enter into an annual "Contract" for Insurance, if you cancel the policy mid term then you have in effect breached the contract. This is what the penalty charge is for.

The penalty charges in the first year are often higher as the Insurers have the costs of setting up the policy and paying commission to the comparison site or paying for new customer discounts etc. In addition the Insurers are not after customers who simply want a short amount of cover so the higher charge in the first year helps put off potential customers seeking this.

A £44 charge for cancelling cover is not that much compared to other companies

Why did you cancel your Insurance?

chirpchirp

I cancelled the policy as I found a better deal so overall I'm happy. I wanted to change to a buildings and contents insurance. I had been with this insurance "company" for over 10 years. I say "company" as it's the AA and they appear to operate more as a broker as the actual company the insurance was with changed this year and perhaps in previous years too. So there was no comparison site charges for them to incur although they would have had to find the best deals themselves.

I rang and emailed about 5 times in total during the last week asking for the actual cancellation charges - no one was able to tell me what these would be until the policy was cancelled. I found this frustrating as it meant I couldn't make an informed choice.

I was told to begin with what the refund would be and that a cancellation charge would also apply. However, when I actually cancelled the lady said what the refund would be and when I asked about the additional cancellation charge I was told this had been taken into account in the figure she had given me. Pity no one else had told me that earlier in the week.

Just because you have entered into a contract doesn't necessarily make their charges right which is why I'm asking the question of whether people think it is proportionate to what is involved in the cancellation. I would have thought the premium itself would be covering their costs in paying a comparison site etc.

BruceyBonus

It would have been made very clear when you took the policy out what the cancellation charges are. Over the phone, you would have been told them. Online, you would have had an opportunity to read them.

dunstonh

I'm wondering whether this is proportionate to the amount of work involved in cancelling a policy and why the amount differs depending on how long you have held the policy.

The cancellation charge is allowed to recover the set up costs as well as the work involved in cancellation. The longer you have a policy, the less set up costs are factored in.

Just because you have entered into a contract doesn't necessarily make their charges right which is why I'm asking the question of whether people think it is proportionate to what is involved in the cancellation.

doesnt need to be proportionate.

I would have thought the premium itself would be covering their costs in paying a comparison site etc.

Its does cover the costs (usually). However, by cancelling early you are incurring service costs and not giving the company the full amount you agreed to which would have covered those costs.