Insurance Admin costs

Bandageman

I have recently had to cancel one insurance policy due to the cost they wanted to charge me being stupidly higher than what it should of been. What ever i did i was going to incure a £35 admin charge. Is it me or are these charges excessive? They feel a bit like bank charges in some respects.

Is there anything that could be done about them, because to me a £15 charge (if they have to charge) is a more fair & balanced cost.

no-oneknowsme

A cancellation charge of £35 sounds about average for most companies.

It has been ruled in the past that anything up to £50 is a fair price to pay for cancelling a policy . Over £50 and that is deemed as too high.

Unfortunately theres not much you can do if you want the policy cancelled but pay the requested £35.

lisyloo

Is it me or are these charges excessive?

Well lots of people would agree with you.
I wouldn't because my opinion is that you need to consider the costs that businesses incurr e.g. rent, electricity, insurance, health & safety, training, equipement (desk, pcs, phones), pensions, sick pay, holidays etc.

They feel a bit like bank charges in some respects.

Legally it's entirely different.
Bank charges were a penalty and this is an admin charge, for work done.

Besides our opinions there are industry guidelines for what it fair and I believe your is well within that guidelines.

because to me a £15 charge (if they have to charge) is a more fair & balanced cost

Are you being fair in what you have included here?
Is not the same as running your home.
They have to pay for employee costs like pensions, sick pay, training etc. They also have to pay for fire extinguishers and liability insurance.
So are you being entirely fair in your assesement of the costs?
Some would say you've been lucky as they are at the lower end of the scale.

Putting the opinions aside, there is nothing you can do, it's legal and judged to be fair under the guidelines.

P.S I don't work in insurance, I just try to look at things in an open minded way.

Let's also not forget that they are in business to make a profit. I am not denying that they make a profit on their work and they are entitled to do that, they are not a charity to help people out.

dunstonh

Is it me or are these charges excessive

Seems quite fair. The FOS have made a number of rulings on admin fees in the past and anything up to £50 seems to be accepted.

They feel a bit like bank charges in some respects.

And the banks won their case. However, there is little similarity.

Is there anything that could be done about them, because to me a £15 charge (if they have to charge) is a more fair & balanced cost.

What is you knowledge of financial services administration and costs to have come by that £15 figure?

You may feel the admin fee is high but if you realised the running costs in financial services you would change your view.

mikey72

dunstonh wrote: »

You may feel the admin fee is high but if you realised the running costs in financial services you would change your view.

It's Champagne, not Asti Spumante at the christmas party.

dunstonh

It's Champagne, not Asti Spumante at the christmas party.

In 1980s it was crates of champagne. In 1990s it was a bottle champagne. Now you get a calender (from many of the providers so you end up with dozens).

The gifts are not what they once were. Although the charges they used to make back then are not as high either. But then neither is the service as good as it used to be either. I guess that is what happens when you focus on costs.

lisyloo

It's Champagne, not Asti Spumante at the christmas party.

LOL - love your style Mikey :T

Yes, of course, businesses need to make profit to pay their shareholders.
That's not some kind of evil activity, it's what provides jobs, services and investment returns in our society.

No-one is saying they are being benevolnet, it's not a charity, but having profit making businesses in our society is cruicial for our advancement and living standard.

I don't think call center people are getting massive salaries and insurers are not making massive obscene profits historically.

foggytown

dunstonh wrote: »

You may feel the admin fee is high but if you realised the running costs in financial services you would change your view.

If he understood the devious machinations of the financial services, he probably wouldn't.

Call me a reactionary old fusspot but I was always under the impression that things like running costs were supposed to be taken into account when establishing pricing. Last I knew, the conventional wisdom had businesses adding up all their costs then adding a decent profit margin and arriving at the selling price. No?

I do believe that so-called admin charges are in reality a cynical accounting charade. Since these charges aren't accounted as premium income, this means that loss ratios are actually better than reported and, therefore, the case for raising premiums is somewhat weaker than the industry wants us to believe.

lisyloo

I was always under the impression that things like running costs were supposed to be taken into account when establishing pricing

Only for the basic policy, not for amendements,
You need to change your "impression" as it's out of date with current pricing models.

If the OP has made a mistake or had a change of circumstance then why should other policyholder cross-subsidise.
I don't change my car, husband or house, willy-nilly so I would should I pay for those that do.
Nowadays pricing models make those that use the services pay.
If you think that's unfair then please explain why.

Last I knew, the conventional wisdom had businesses adding up all their costs then adding a decent profit margin and arriving at the selling price. No?

No.
Let's take the RyanAir model as it's probably easier for lay people to understand than the financial industry.
When you buy a ticket you pay for a flight only.
You don't pay for name changes, bags etc.
You have to pay for those on top.
The people that use the service pay.
Others no longer cross-subsidise by having effectively a "levy" put on their ticket to cover everyone (except for wheelchairs).

You need to move on a bit from the conventional, times have changed.

I do believe that so-called admin charges are in reality a cynical accounting charade.

Admin charges have had a maximum set by guidelines. I can't quote who set it but it's independent of the insurers.

Anyhow, if you want to run a company better, then go and do it !!
If you want something in life you have to go and get it, not sit on the sidelines whinging that what other people are doing is not good enough.

dunstonh

Call me a reactionary old fusspot but I was always under the impression that things like running costs were supposed to be taken into account when establishing pricing.

That was the old way. The FSA prefer explicit charging rather than cross subsidy and in some areas they are making it compulsory whilst on others they just are encouraging it.

Last I knew, the conventional wisdom had businesses adding up all their costs then adding a decent profit margin and arriving at the selling price. No?

Not in the world of the FSA and current consumer markets.

I do believe that so-called admin charges are in reality a cynical accounting charade. Since these charges aren't accounted as premium income, this means that loss ratios are actually better than reported and, therefore, the case for raising premiums is somewhat weaker than the industry wants us to believe.

They are a result of the consumer demand for quote portals. The focus of which is almost totally based on getting the lowest possible price for the annual premium. So, the bolting on of add on charges and ancillary options is a consequence of that.

mikey72

I'm with foggytown on this.
But sadly I think nowadays lisyloo is right, insurance companies tend to have the same business model as Ryan Air. I always thought it was double glazing, but I can see the comparison with taking the worse of both businesses.
Which is probably enough said on it.