Cancellation costs more than not!

Nic359

Don't know if I'm missing something here...

I have just sold my motorbike since I rarely use it. I therefore phoned my insurance company to notify them and arrange to cancel the policy.

They said I need to write to them and return the certificate, and they would charge me £30 cancellation fee, and then refund a portion of the remaining term. All perfectly normal. However, it turns out that the £30 cancellation fee is more than the refund:

Original policy for one year from 22/11/05: £97.55 (paid in full at the start)
8 months cover used means I have to pay 76% of the yearly premium
(£74.14), leaving a refund of £23.41.

I therefore said that it would be cheaper for me to not cancel, and was told that I cannot have a policy for a vehicle that I no longer own.

Is there anything I can do here, other than pay the £6.59 to cancel the policy? I know it isn't a lot, but I object to paying more to cancel the policy than I would to just let it expire.

Thanks.

Astaroth

The problem is that you have no legal right to cancel a policy mid term - once the 14 days cooling off period has gone.

You could ask them to suspend the policy rather than cancel it if you have an intention to buy another bike in the nearish future though I imagine you should be able to argue the fact they should simply waive both the refund and the cancelation charge so you just pay the full years premium and call it quits

Nic359

So if I have no legal right to cancel, could I just let the policy lapse at the end of the year? Or would that be illegal because I would have an insurance policy for a vehicle I no longer own, even if I don't claim (which I wouldn't)

Astaroth

You have no insurable interest in the vehicle any more as you no longer own the vehicle and so this makes the insurance invalid. If however there was an accident and the person who had bought the vehicle off of you hadnt insured it because you still hold a valid certificate of insurance then your insurers would have to settle the claim as the RTA insurer. As far as I am aware it is not illegal for the insurance to continue but because of the risk they may have to pay out on a claim I can see why they dont want the policy to continue to run.

I know a fair amount of contract and insurance law but if someone else thinks it is illegal rather than potentially against the terms of the policy then I would be interested to know which act outlaws it.

ArchieB_2

I think the insurance company needs to simply apply some common sense and just cancel the policy with no premium refund. Try to speak to somebody like a supervisor as they should be able to do this.

You do have a right to cancel the policy as the terms of cancellation are in the policy and form part of your contract. I don't know the legalities of maintaining a policy if you have sold the vehicle but I have done this before on a motorbike as the premium was worth paying simply to continue building my NCD.

Victors_Bruvver

Is the £30.00 cancellation fee a fair and fully justified figure. Why not charge say a nominal £10.00?
Does it really cost insurance providers/brokers that amount (£30) to cancel something on a computer?

Astaroth

But when you have no legal right to cancel then it is loss of income that they are charging you for - most insurers prefer to have a cancellation term in the policy and charge a fee rather than not have any cancellation terms and force people to keep the policy for the 1 year that they took it out for.

dunstonh

Victors_Bruvver wrote:

Is the £30.00 cancellation fee a fair and fully justified figure. Why not charge say a nominal £10.00?
Does it really cost insurance providers/brokers that amount (£30) to cancel something on a computer?

I think it's fair.

Car insurance is very competitive and has low margins. If these fees were not charged, then the cost of insurance would rise to absorb them. In the past that is what happened.

Astaroth

dunstonh wrote:

Car insurance is very competitive and has low margins.

Margins are low is an understatement... for the majority of insurance companies they are currently making a loss hence why the AA and a number of other big insurers are calling for the market to increase their prices