MSE News: Consumers urged to fight rising insurance admin fees

dunstonh

These fees are simply a disgrace with honest people being ripped off for staying legal and having valid insurance, it simply cannot cost them £35 to amend a policy... its obvious insurers are profiteering and they know they've a captive audience with motorists.

Fees are the FSAs preferred method as they are fairer. The alternative is to increase the premium for everyone whether they use the services or not. That cannot be unfair as why should those not creating the work have to pay for it?

That said, there are still companies that do not have admin charges but increase the premium to cover it. So, if that is what you want then why don't you buy that?

Why are you trying to reduce consumer choice by removing a charging method that is best for the majority of people?

Incidentally, there is a Government e-petition calling for regulation or banning of these insurance admin fees:

epetitions.direct.gov.uk/petitions/26711

Ill thought and stupid e-petition.

I could imagine there would be many people just as upset with these fees?

Only if they are too ignorant to want to understand how charges work.

Extravagoose

dunstonh wrote: »

Fees are the FSAs preferred method as they are fairer. The alternative is to increase the premium for everyone whether they use the services or not. That cannot be unfair as why should those not creating the work have to pay for it?

That said... if the FSA considers that... why are fees so variable? from company to company?

That said, there are still companies that do not have admin charges but increase the premium to cover it. So, if that is what you want then why don't you buy that?

I've not come across many insurers that do this... and even then do people have much of a choice when it comes to being able to afford the premium?...

Why are you trying to reduce consumer choice by removing a charging method that is best for the majority of people?

How is it best for the majority? Motor Insurance is a legal requirement circumstances can often change... keeping policies valid is a legal requirement - aside from extra premium increases, why should people be penalised for being honest? Does it REALLY cost £35 to update an individual policy for example, adding a named driver or changing address? Why do insurers not offer online alternatives that could potentially be cost free? It's simple... there is very poor overseeing of what is effectively a captive audience for many insurers. Its obvious they are doing much more than "covering costs". The way I see it is everyone is effectively in the same boat unless you have the luxury of not having to worry about money...

Ill thought and stupid e-petition.

Everyone's entitled to their opinions of course...

Only if they are too ignorant to want to understand how charges work.

Well if you are the subject expert... please enlighten me...

Every time i've asked insurers to explain the admin charge and/or provide a detailed breakdown they have refused... so far as I see them, they are nothing more than a necessary evil and rip off merchants.

dunstonh

That said... if the FSA considers that... why are fees so variable? from company to company?

Because that is the nature of living in a capitalist society. Companies are able to price their products and services as they see fit. Although the FSA does require the charges to be fair and the FOS have generally considered up to £50 as being fair when there are complaints.

Its no different from you getting quotes from builders to do a job and finding one at £10,000, another at £15,000 and another at £20,000.

I've not come across many insurers that do this... and even then do people have much of a choice when it comes to being able to afford the premium?...

The old way does still exist but with the move to explicit charging and implicit charging being frowned upon, there are less. From 2013, whole chunks of financial services companies are having to move to explicit charging under an FSA remit. It is not mandatory for insurance yet and no current proposals are there to make it happen but that is the trend.

How is it best for the majority?

The majority of people do not contact the insurer mid policy year to make any changes. So, they do not pay any admin charges and their premium is not increased to cover the costs of those that do. Only those that create the work pay for it.

Does it REALLY cost £35 to update an individual policy for example, adding a named driver or changing address? Why do insurers not offer online alternatives that could potentially be cost free?

In some cases no. in some cases yes (or even more). They have to balance simplicity with cost. They cant say it will cost you £x per minute as the public dont want that. So, they have to come out with a simple charging structure and having a fixed charge per admin task is the logical option.

The actual transaction itself, doesnt cost much. However, you have to consider the costs that exist to allow that transaction to be done quickly. The acturies that need to paid for, the person that does the transaction, their supervisors, the compliance team that overseas it all, the IT staff that program the computers, the computers themselves that have to be updated periodically, the storage of recordings and documents, the building the staff sit in. The regulatory costs can account for 1/3rd of the amount you are paying. Someone has to pay for them.

Every time i've asked insurers to explain the admin charge and/or provide a detailed breakdown they have refused...

Totally correct too. It is sensitive commercial information.

so far as I see them, they are nothing more than a necessary evil and rip off merchants.

That is because you are looking at one thing in isolation. You are not looking at the lower premium because the admin costs are factored out.

Parking_Trouble

Read this Published 14th Dec 2011

http://www.oft.gov.uk/shared_oft/markets-work/private-motor-insurance/Motor_Insurance.pdf

On Page 18 it says:-

Consumers having to pay a fee if they wish to cancel their private
motor insurance and switch to another private motor insurer.
As part of the call for evidence, private motor insurers provided information to the OFT regarding their renewals process and the costs incurred in cancelling a customer's private motor insurance policy. On the basis of data obtained, we do not consider that these cancellation fees would constitute a significant barrier to switching.

Information provided to us indicated fees of up to £50 for a typical midterm cancellation. When cancelling a policy insurers face administration costs and attempts to reclaim costs such
as those incurred when validating information upon the sale of the policy. Insurers have also identified costs related to the 'last known insurer' clause in the Road Traffic Act 1988 that leaves them potentially liable if a customer cancels a policy and subsequently has an accident
while uninsured.

afwone

Extravagoose wrote: »

Unfortunately, because i'm so new to this site, I seem to not be allowed to post actual links incase of spam *sigh* so will have to copy and paste unless an admin edits.... despite that... might be worth signing it and passing it on. I could imagine there would be many people just as upset with these fees?

Well I am happy to post a link to your petition:

http://epetitions.direct.gov.uk/petitions/26711

Imposition of fees could be acceptable if they were transparent and applied in a fair way. Alas a good position on a price comparison website now seems to be worth more than good customer relations.

The numbers of people who feel aggrieved by insurance companies acting in what seems an unreasonable manner would suggest that something needs to be done.

dunstonh

Imposition of fees could be acceptable if they were transparent and applied in a fair way.

You mean like publishing it in their charges section/booklet or on their website for you to read before you purchase it?

Alas a good position on a price comparison website now seems to be worth more than good customer relations.

Quote comparison sites are responsible for a downgrading in quality and a race to the cheapest premium. That cannot be denied. However, they are giving the public what the public wants.

The numbers of people who feel aggrieved by insurance companies acting in what seems an unreasonable manner would suggest that something needs to be done.

And if you asked those same people if they would prefer to pay higher premiums each and every year to pay for it, do you think their response would be the same? The problem is that these people dont want to pay the admin fee and dont want to pay higher premiums. So, what is the alternative?

mikey72

dunstonh wrote: »

.........Quote comparison sites are responsible for a downgrading in quality and a race to the cheapest premium. That cannot be denied. However, they are giving the public what the public wants..........

They're selling want the insurers want to sell.
A clamouring mob kicking each other out of the way to get to the top of the heap, shouting "buy me".

Parking_Trouble

Better control of CMC's and Ambulance chasers and stopping referral fees and no win/no fee will allow the insurers to offer better policies, better customer service, better value for money and no hidden surprises.

afwone

dunstonh wrote: »

You mean like publishing it in their charges section/booklet or on their website for you to read before you purchase it?

In my experience it is not easy to find information on charges imposed by insurance companies, though it may be buried away somewhere in the small print that one has to agree to.

It is pretty much impossible to know how strictly the charges will be imposed by any given insurance company until the situation arises.

dunstonh wrote: »

Quote comparison sites are responsible for a downgrading in quality and a race to the cheapest premium. That cannot be denied. However, they are giving the public what the public wants.

It is not unreasonable for 'the public' to seek out the most reasonably priced premium for their particular situation.

The cost of the premium will depend on many factors, among which are (1) the efficiency of the company, (2) the extent to which there are additional charges, and (3) the quality of the service provided to the customer.

At present it is generally not clear just what one is buying from an insurance company at the point of sale.

dunstonh wrote: »

And if you asked those same people if they would prefer to pay higher premiums each and every year to pay for it, do you think their response would be the same? The problem is that these people dont want to pay the admin fee and dont want to pay higher premiums. So, what is the alternative?

At present 'these people' are not really given a choice.

When buying a low cost air ticket, one is at least aware, ultimately, of what one has to pay for a flight and what one will receive for it. The problem with applying the Ryanair model to insurance is that one has little idea of what one is buying and how suitable it will be.

I suspect that this is a problem that the market will not address by itself, and the alternative has got to be some degree of regulation.

dunstonh

In my experience it is not easy to find information on charges imposed by insurance companies, though it may be buried away somewhere in the small print that one has to agree to.

On most occasions when someone complains about them here it takes only a minute or two to find it on their site. On quote comparison sites, it is available to read during the application process.

At present 'these people' are not really given a choice.

Yes they are. There are still providers who have no admin charges and those that day. So, choice does exist. Problem is that the ones without admin charges tend to be further down the list on pricing.

When buying a low cost air ticket, one is at least aware, ultimately, of what one has to pay for a flight and what one will receive for it. The problem with applying the Ryanair model to insurance is that one has little idea of what one is buying and how suitable it will be.

Its not comparable.

I suspect that this is a problem that the market will not address by itself, and the alternative has got to be some degree of regulation.

And the FSA prefers explicit charging. So, that would mean fees.