Cancellation charges

Theosmum_2

My partner passed his driving test in january. He bought a cheap runaround which cost £1500 to insure. The car has now broke down, and is not goi to be worth repairing. When I rang to check what cancellation fees would be applied i was told it would be £38 and 50% of the premium, as in £750!!!! Although this may be stated in the t and ca can they do this? Surely that is not a fair charge?? Any asvice would be greatly appreciated

dunstonh

Surely that is not a fair charge??

The cancellation charge is fair. FOS generally allow up to £50 as an admin/cancellation charge.

The amount of premium that is refunded will generally be pro rata + around 2 months. If there were addons bought (legal cover, RAC/AA etc) then these are normally not refundable. Also, if a credit agreement was used (when you pay monthly), then the costs of credit can add a bit as well as that needs to be paid.

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Theosmum_2

We paid the whole year in full, so there will be no credit charge. So 50% premium is a fair cancellation fee?

mikey72

The FOS don't entirely agree, they would accept the charge of £38, but a pro rata premium of 1/3 would be more likely nearer.

Have a look at
https://forums.moneysavingexpert.com/discussion/comment/39938318#Comment_39938318

Theosmum_2

Ok I will do. Thanks

bouncydog1

The premium charged is made up of different elements as Dunston stated. Were there any additional adds on - legal expenses cover, hire car etc. etc. If there were these are not usually refundable.

The insurer has charged short period rates which are not the same as pro-rata. In your policy booklet there will be a section on cancellation which will clearly outline what portion of the premium is charged for x months cover.

The cancellation fee is £38 which is deemed fair.

mikey72

bouncyd!!! wrote: »

The premium charged is made up of different elements as Dunston stated. Were there any additional adds on - legal expenses cover, hire car etc. etc. If there were these are not usually refundable.

The insurer has charged short period rates which are not the same as pro-rata. In your policy booklet there will be a section on cancellation which will clearly outline what portion of the premium is charged for x months cover.

The cancellation fee is £38 which is deemed fair.

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/54/54.pdf

page 12 on
not fair terms, already ruled on.

dunstonh

http://www.financial-ombudsman.org.u...news/54/54.pdf

page 12 on
not fair terms, already ruled on.

The refund applies to premium. Not add ons.

If there are no ancillary products sold with the premium then the company will be asked why they feel 50% is fair after 25% of the timescale. If there are ancillary products then they will be taken out of the equation (so it may be a more reasonable 30-40%. Hence why the question was asked if there were any ancillary products.

mikey72

I never take any add ons, so fair point.

As an aside though, why are add on not refundable.

I've never tried to cancel one myself, so I haven't looked at it in depth.
But even a breakdown policy, like the AA, when it is cancelled, has no refund in the t&c's.