MSE News: Consumers urged to fight rising insurance admin fees

Queries

Something which I will think you make you all laugh is this: In the old days of insurance (before the no win, no fee solcitors became well known), I was insured with Norwich Union. This is about 20 years ago. I had a Robin Reliant (Only fools and Horses). It was stolen and burnt out on a Saturday Lunchtime on Salford Precinct (please don't even go there now! There's a video on Youtube of some Police coming back to their van to find their locks had been superglued) Anyway, I was visiting a friend for five minutes, so I did not bother disconnecting the one spark plug cable (which I usually did, especially since the bonnet was locked by the driver's key). Anyway, my Reliant was nicked within ten minutes and an hour later the thieves had burnt it out in a regular, Saturday afternoon's shoppers subway. I don't think I even called the Police, but I did contact Norwich Union, who asked me could I tow it to a garage and prove it was a write off. I in turn asked them could they provide three carrier bags, since it was a fibre glass car. Six months later (without chasing) I received a cheque in the post which covered the full cost of my car. In those days there was no excess. Nowadays it is because insurance companies have paid out on personal injuries claims, when they should have been investigated from day one. But no, they were far too lazy to nip it in the bud and gave monies out to all and sundry on fraudulent claims - knowing full well that their customers would carry the costs in increased insurance premiums, whilst, like the banks their own top-dogs would be given thousands if not million pounds of wages and send-offs! I could say more, but point made, I think!

RichBen

As MSE s always preaching, companies are there to make money. Admin fees are usually charged by intermediaries, not insurers (the insurers just alter the premium they charge). As pressure on premiums has driven them ever lower, commissions have been squeezed. Therefore, the only way a good quality intermediary can survive and make a living is by charging admin fees. These should always be clear up front (the regulator demands it) what these will be (either in your quote or in the terms of business issued to you) and you must understand these if they are likely to be a problem to you. But also understand that if you feel they are excessive for the service you will receive, go elsewhere. If the intermediary doesnt add the value then by all means DIY it, but if you want them to do the work for you then you have to be prepared to pay them for doing the work.

dacouch

RichBen wrote: »

As MSE s always preaching, companies are there to make money. Admin fees are usually charged by intermediaries, not insurers (the insurers just alter the premium they charge). As pressure on premiums has driven them ever lower, commissions have been squeezed. Therefore, the only way a good quality intermediary can survive and make a living is by charging admin fees. These should always be clear up front (the regulator demands it) what these will be (either in your quote or in the terms of business issued to you) and you must understand these if they are likely to be a problem to you. But also understand that if you feel they are excessive for the service you will receive, go elsewhere. If the intermediary doesnt add the value then by all means DIY it, but if you want them to do the work for you then you have to be prepared to pay them for doing the work.

Some Insurers do charge Administration fees

raskazz

dacouch wrote: »

Some Insurers do charge Administration fees

I'm not sure about 'commissions being squeezed' either. Brokers who can demonstrate a book of quality business are still getting paid relatively high levels of commission, and as rates have increased around 30% over most classes in the last year they are getting 30% more income in return for no extra work (if they maintain their policy count and demographics).

Buzzed_Off

I have been reading with interest, so much so it has prompted me to register on MSE! I have not had an insurance renewal notice from Kwik Fit so i called them, only to find out that my premiums have gone from £47 per month to £113.97 per month! I haven't changed anything or done anything wrong! Now they want £400 to cancel the policy. How can they get away with that? Not only can i NOT afford the monthly premium, but i can't afford the cancellation charge either!
Any advice..?
:mad::mad:

dacouch

When was your renewal date ?

dunstonh

Buzzed_Off wrote: »

I have been reading with interest, so much so it has prompted me to register on MSE! I have not had an insurance renewal notice from Kwik Fit so i called them, only to find out that my premiums have gone from £47 per month to £113.97 per month! I haven't changed anything or done anything wrong! Now they want £400 to cancel the policy. How can they get away with that? Not only can i NOT afford the monthly premium, but i can't afford the cancellation charge either!
Any advice..?
:mad::mad:

The FOS publications show that they have accepted admin charges up to £50 as being acceptable as long as the charge is published. (they may accept higher but so far only examples up to £50 have appeared in their publications.

The £400 you say is not going to be the admin charge. Part of it will be but part of it will be the insurance premium covering a period to the next cancellation point.

The FOS publications also have information on how pro-rata premium refunds are expected to be treated. They require the terms to be published and fair. However, they dont have to be exact. e.g. a cancellation after day 28 could allow them to charge 90 days cover. However, they couldnt get away with say 180 days cover.

If you buy ancillary services with the premium (such as breakdown cover or legal expenses or other 3rd party services) these often do not have refund terms applied to them.

How was your charge broken down?

Buzzed_Off

My renewal date was 4th December but I hadn't written it down and i never received a renewal notification either. I have read on the CAB website that motor insurers do not have to send out reminders, so i can't do anything there. Kwik Fit said their premiums had jumped as they were underwritten by Zurich during 2009/10 but they pulled out in December so their underwriters are now someone else. I don't mind paying a cancellation fee i just think £400 is a bit steep! Especially as my insurance is paid in advance not arrears and i'm not a new customer of theirs so they are retaining me.
They also didn't break it down to me. They just waffled some sums over the phone which i didn't understand like it was the whole premium divided by this and multiplied by that which equaled £400.

dunstonh

I don't mind paying a cancellation fee i just think £400 is a bit steep!

As i mentioned above, you are not paying a £400 cancellation fee. You are probably paying around £50 as a cancellation fee with the rest being premium cost to the next cancellation point (and possibly any third party services bought).

You need to ask them how the charge is broken down.

dogbot

I have read on the CAB website that motor insurers do not have to send out reminders,

If that is the advise on the CAB website, it is wrong or has been miss-understood. Insurers do have to send you a renewal notice showing you the payments next year, the FSA require it. Most aim to "invite" renewal 1 month before renewal date, which usualy allows for plenty of time. Of course, the Post Office have struggled rather with the snow.

If this was not recevied then pursue this as a line of complaint with them and see if they will waive any cancellation fee. You would still have to pay for the time on risk.

However, it is ultimatly still up to you to remember when your renwal date is and do something about.

They also didn't break it down to me. They just waffled some sums over the phone which i didn't understand like it was the whole premium divided by this and multiplied by that which equaled £400.

So, as others pointed, this is NOT an admin charge, but the full charge including time on risk. Despite what you say it does sound like they tried to break it down for you - there will be any admin fee, then the cost of the time on risk will be calculated which would be what they talked about.

As you are paying in installements there may are premium finance issues making it more complicated - you have purchased the insurance on credit and are paying for it over time, not paying monthly. The £400 may include some money you have already paid.

Call them again and get them to break it down for you again and explain exactly what you have to pay when and how if you cancel.