MSE News: Consumers urged to fight rising insurance admin fees

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Some firms charge £110 to cancel a policy yet critics have questioned whether this reflects the true cost to a company ..."

Read the full story:
Consumers urged to fight rising insurance admin fees

MORPH3US

I have found that with most insurance companies - when you ring up and say for example "we've moved house and need to update our car insurance" and they ask new postcode etc and then they say "right that will be an extra £45"....

What they actually mean is "that will be an extra £10 plus a £35 administration fee for updating the details" or something along those lines....

I.e. they bundle the admin fee into the additional cost so you don't actually know what the extra cost for the extra risk of the new area you live is (for example) and what the admin fee on its own is...

dunstonh

The FOS generally accept up to £50 as an acceptable admin charge if you go by their publications.

However, those charging £110 or the like are probably doing it as they are making a loss on the annual premium by using a premium that looks good on quote comparison sites.

The pendulum seems to be no/low admin costs = high annual premium and higher admin costs = lower annual premium. (knowing that exceptions will exist).

michaels

My best was home insurance. I took a new policy to cover my new house from exchange and went to cancel my existing policy on completion at which point it had about 6 weeks (of the annual policy) to run.

Insurer told me that with the cancellation fee in order to have 6 weeks less cover I would have to pay them about 37 quid (£50 canx fee less about £12 refund on policy) and also said I would not be able to just let the policy expire as I no longer had an insurable interest in the first property. Moral of the story was I should have forgotten to tell them.

Silver lining in this case was that although the new policy was apparently with a different company it turned out that both were just fronting for the same insurer so they agreed to waive the fee but that was just luck.

I can see the reason for the fees given that the admin costs to set up a policy is not negligible (especially if you count the finders fees paid to the likes of Go Compare) and I beleive most insurers do reduce the fees if you have been with them more than one year as the set up costs should be covered in the first year's premium, which seems fair.

mmillie

The other scam in this area is that your policy might cost £250, plus £25 for physio care, plus £25 for legal cover, plus £50 to protect your no claims, so £350 in total. However, if you cancel, the pro-rata refund will be on the £250 policy, not on the £350 total cost.

I found this out to my expense when cancelling an RAC policy. I wrote to complain that it didn't reflect what I was told on the phone, and I was told that that was just the way it is. Needless to say I'll never buy anything from RAC again.

Martin

davidgmmafan

"The Financial Ombudsman Service says administration and cancellation fees have to reflect the cost to firms."

The FOS is quoted with words to this effect twice in the article. The trouble is how is the customer supposed to determine this? I've no doubt they will say something similar to what Virgin Media say when challenged on this ridiculous £5 per month non-dd payment processing charge. That information is commercially sensitive. Ah right so I'm expected to take the word of a company I'm in dispute with...

Also loving how this magically doesn't apply to banks because of some fiction their lawyers created in the Test Case.

Finally I too was scammed by the RAC when cancelling, the facts surrounding that are not important. Thier explaination of how the charge was arrived at was, to put it mildly, a load of waffle. However they tried to word it it amounted to pressing a button.

Fortunately for me they'd not send the information detailing the cancellation fee. It told me what happened if cancelled in 14 days but not after.

This is the trouble though, if they do whos going to read all that on every quote they get? Its NOT integral to the policy which is why they sneak it in there.

The best advice I can give people if you disagree is complain, making reference to the FOS early. That will signal that you mean business, and its going to go someone senior whos time will probably be comparable in cost to the complaint even without any FOS fee.

foggytown

This group's apologists for the insurance industry won't admit it, but my strong suspicions are that insurers consider the admin fees as a nice little earner for them. How could it not be? They already possess every bit of technology and software needed to change an address, name, etc. (The exact same stuff they used to acquire the business, in fact!)The physical effort required is negligible and done by people already on the payroll. It's just a cynical ploy to increase income.

trynsave

A few weeks ago I changed my car. I had to pay £30 to amend the policy and a further £20 admin fee!

Last week my office then asked me to do a one-off job which involved me driving my own car. I phoned to check my policy, just to be sure, and to my horror I was quoted £4 to amend the policy and another £20 admin. I asked if they could be lenient as I had just paid one fee, but I was told the rules are the rules (thanks AA). However if I had done both amendments at the same time it would have just been one £20 fee.

Either the work that needs doing involves time and effort or it doesn't. I don't mind paying (well I do really but I can take the hit), if the task I'm asking for warrants it, but I strongly object to just having to pay for the sake of it!

miller

mmillie wrote: »

I found this out to my expense when cancelling an RAC policy. I wrote to complain that it didn't reflect what I was told on the phone, and I was told that that was just the way it is. Needless to say I'll never buy anything from RAC again.

Cancelled a Green Flag policy and they charge a high percentage as an admin fee, which would often leave you with nothing. How can a percentage cost of the premium be justified for a breakdown policy. It should be fixed (or better still not at all!!).

davidgmmafan

"This group's apologists for the insurance industry won't admit it, but my strong suspicions are that insurers consider the admin fees as a nice little earner for them."

I totally agree with this, the next bit about having the technology and info already reminded me of another corker from years ago. Partner at the time moving house. The premium increased, not a huge sum but it was the principle. But I'm moving to a better area, Insurance co's reposite ah but that means if you do have an accident the chances are you will crash into a more valuable vehicle and the costs would be higher. This is reflected in the premium.

They've got it all ways haven't they!

afwone

So: 'Consumers urged to fight rising insurance admin fees'

But how? Just by asking the Insurance company to be nice and reasonable? My experience was that the company said take it or leave it, and there is another fee for cancelling (even during the initial cooling off period).

Price comparison websites of the type championed on this site are a big part of the problem. Having lured customers in with a lower premium, insurance companies feel it is their right to make more money off the customers they are able to trap into paying fees.

The problem is clear enough. What is the solution?