rip off RAC car insurance cancellation fees

juebags

I just found this forum so thought i'd add my experience of today with the RAC car insurance.
I took out car insurance with RAC on the 22nd of October which cost me £343 for the year including breakdown cover and legal cover I paid £65 deposit and was going to pay monthly installments. Today I sold the car and phoned RAC to cancel the policy and was told it was going to cost me £121 to cancel which was 30% of the 343 and the £35 cancelation fee when i asked if the £65 i had already paid was going to be deducted from the 121 i was told no, I proceeded to tell them that the money was not in the bank and they said they would give me an extra 30 days to cancel but i would have to pay for the extra month so would be charged £150 cancelation fee. So i got off the phone really upset as only on a low income i would now be overdrawn in the bank in the morning so decided to phone them back and get them to explain the breakdown of the money they wanted. they then told me that I could not have the extra month cause i have no longer got the car and it would be illegal so they said they would be taking the money straight away so they could cancel it. I asked them to put it in writing but they refused and said it wasn't possible for them to do that .
what i would like to know if anyone can tell me is when they say its 30% of the total years money does that mean on top of what i have already paid ?? i am so shocked by all this and have never experienced anything like this they are so rude when you want to cancel and really don't explain anything can someone advice please

System

juebags wrote: »

I just found this forum so thought i'd add my experience of today with the RAC car insurance.
I took out car insurance with RAC on the 22nd of October which cost me £343 for the year including breakdown cover and legal cover I paid £65 deposit and was going to pay monthly installments. Today I sold the car and phoned RAC to cancel the policy and was told it was going to cost me £121 to cancel which was 30% of the 343 and the £35 cancelation fee when i asked if the £65 i had already paid was going to be deducted from the 121 i was told no, I proceeded to tell them that the money was not in the bank and they said they would give me an extra 30 days to cancel but i would have to pay for the extra month so would be charged £150 cancelation fee. So i got off the phone really upset as only on a low income i would now be overdrawn in the bank in the morning so decided to phone them back and get them to explain the breakdown of the money they wanted. they then told me that I could not have the extra month cause i have no longer got the car and it would be illegal so they said they would be taking the money straight away so they could cancel it. I asked them to put it in writing but they refused and said it wasn't possible for them to do that .
what i would like to know if anyone can tell me is when they say its 30% of the total years money does that mean on top of what i have already paid ?? i am so shocked by all this and have never experienced anything like this they are so rude when you want to cancel and really don't explain anything can someone advice please

Your policy documentation will inform you what charges apply when you cancel. You agreed to these terms when you took out the policy.
The relevant text from the RAC policy is :

If you cancel your policy
If you cancel your policy within 14 days of receiving your policy documents you will have to pay for time on cover unless you have made a total loss claim, in which case all outstanding payments will become due and no refund will be given.
If you cancel outside of the 14 day cooling-off period, we will charge a cancellation fee of £35 and a percentage of the total premium payable for the policy.
If you cancel while a claim is outstanding, you will have to pay the total amount of premium due before the claim can be settled. If you cancel after a claim has been settled you will have to pay the total amount of premium due. In either case no refund of premiums already paid will be given.
If you cancel within... % charged
1 month ................. 30%
2 months ................ 40%
3 months ................ 50%
4 months ................ 60%
5 months ................ 70%
6 months ................ 80%
7 months ................ 85%
8 months ................ 90%
9 months onwards ....... 100%
If you cancel any additional products taken out with this policy, but not the main policy within 14 days of receiving our policy documentation, you will pay for time on cover only. After this time, no refund will be given. If you cancel the main policy then any additional products taken out will also be cancelled and no refund will be given for these products.
If we cancel your policy the same fees and charges will apply. Please also see the section on 'Cancelling this insurance' contained in the General Policy Terms.

mikey72

But the more relevant terms the FOS like to see are

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


roughly pro rata cost, plus the cancellation fee of £35

Put in a written complaint, then refer it to the FOS. State if they do cause you to go overdrawn and so incur charges, you expect them to be responsible for those as well.

System

mikey72 wrote: »

But the more relevant terms the FOS like to see are

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


roughly pro rata cost, plus the cancellation fee of £35

Put in a written complaint, then refer it to the FOS. State if they do cause you to go overdrawn and so incur charges, you expect them to be responsible for those as well.

That FOS link of yours includes :

We recognise that there may also be seasonal or other features of the policy which could justify different approaches to refunds. And we recognise the more fundamental point that under some policies, both the risk and the insurer’s potential liability may be higher at the outset of the policy than at the end – so the premium calculation will reflect this.

So the 30% charge for cancelling in the 1st month could be judged as fair since the early costs to the insurer are higher than later in the policy term.

Personally, I do not think these RAC cancellation terms are unfair and they are clearly itemised in the documentation and it seems in the OPs case these terms have been followed.

mikey72

BAA1 wrote: »

That FOS link of yours includes :

So the 30% charge for cancelling in the 1st month could be judged as fair since the early costs to the insurer are higher than later in the policy term.

Personally, I do not think these RAC cancellation terms are unfair and they are clearly itemised in the documentation and it seems in the OPs case these terms have been followed.

Personally, I do think they're unfair, and it doen't really matter how many times they are in the t&c's if the FOS agree.

30% of the cost for 5.5% of the cover?

dunstonh

Personally, I do think they're unfair, and it doen't really matter how many times they are in the t&c's if the FOS agree.

30% of the cost for 5.5% of the cover?

The FOS do generally accept that on many transactions, virtually all the cost incurred is at the start. So, it wouldnt be difficult for a company to say they incurred that cost and therefore early refunds are not pro rata.

I think the RAC refund rates are fair up to around 5 months. From there onwards, I think that they push it as that is the time you should be getting closer to pro-rata. However, I dont know RACs systems and costs and they may have acceptable reasons for having it that way.

You also have to say that the charges are clearly laid out and very easy to follow. So, complaining after the event is a bit churlish.

On an unrelated note, the FSA earlier this week confirmed that no refund is required on the charges related to advice if someone chooses to cancel their product, whether it is on day 1 or later. So, lets say the broker moves off commission and has an explicit charge, then any refund terms would automatically suffer a higher charge early on as the advice charge has not been diluted by time.

mikey72

dunstonh wrote: »

The FOS do generally accept that on many transactions, virtually all the cost incurred is at the start. So, it wouldnt be difficult for a company to say they incurred that cost and therefore early refunds are not pro rata.

I think the RAC refund rates are fair up to around 5 months. From there onwards, I think that they push it as that is the time you should be getting closer to pro-rata. However, I dont know RACs systems and costs and they may have acceptable reasons for having it that way.

You also have to say that the charges are clearly laid out and very easy to follow. So, complaining after the event is a bit churlish.

On an unrelated note, the FSA earlier this week confirmed that no refund is required on the charges related to advice if someone chooses to cancel their product, whether it is on day 1 or later. So, lets say the broker moves off commission and has an explicit charge, then any refund terms would automatically suffer a higher charge early on as the advice charge has not been diluted by time.

I don't think I've ever had advice, apart from maybe for an AVC many year ago. I think I am still paying for that. I know my pension isn't getting the money by the way it's not going up anymore.

As to it being fair or not, saying as a complaint via the FOS costs the customer nothing, I don't thnk it's worth writing off the £186, (30% of £43, is only £103, so then add £35 on, it seems it should be £138 even under the t&c's) when a fair value would be £54.

I would be generous, and let them keep the deposit of £65.

(As to all the costs are incurred at the start, it'll be interesting to see what the RCA supply to the FOS to justify the extra £132, unless you're saying the actual cot of the time on risk is low for the year, but the paperwork is the dear bit?)

dunstonh

don't think I've ever had advice, apart from maybe for an AVC many year ago. I think I am still paying for that. I know my pension isn't getting the money by the way it's not going up anymore.

it doesnt have to be just for advice. It can be any work done. This is a consequence of moving to explicit charging. If work is done whether the product is bought or cancelled then the cost of work is allowed to be factored in.

(As to all the costs are incurred at the start, it'll be interesting to see what the RCA supply to the FOS to justify the extra £132, unless you're saying the actual cot of the time on risk is low for the year, but the paperwork is the dear bit?)

Its not just paperwork though. Its liability, regulatory cost and costs which are not as easily identified at first. That liability and regulatory cost remains whether a policy continues or ceases.

zoecox

Hi, this is my first time on here. I joined after reading this thread and thought I would tell you about the problem I am currently having with RAC car insurance!
My partner and I bought a Ford Puma in May and insured it with RAC. My partner (who is 32) has been driving for 4 years but as a named driver so has no no claims. I myself was put on as a named driver on a provisional licence (I am 30 years old). The insurance cost us £1440 spread over 10 months.
I then passed my driving test last month - horray I originally thought!
However, my partner then did the correct procedure of letting RAC know of this change. They proceeded to tell him that we can no longer be insured with them unless we cancel our current policy (of which to date we have paid £970 for 6 months) which will cost us over £300 (erm...we only have £470 left to pay!) and then take out a completely new policy at the cost of £2700!! We cannot afford this!
How in God's name can they possibly justify this? We are hard working parents, not teenage joyriders!! I have found another company who will insure us for £1600 but we are stuck as we cannot possibly afford to pay the cancellation fee as well as downpayment for a new policy. Furthermore, I am now still uninsured and can therefore not get to and from work and so can not earn!! I have been a provisional driver for 13 years, I then do the right thing of passing my test and seem to be penalised for doing so!!
Any advice or guidance as to what we could do would be much appreciated!!

InsideInsurance

It is standard that insurance increases after you pass your test. I suspect given how long you had held your previous license will make things worse as you previously stated 13 years experience and now have to state 0. My wife and I are of similar ages and our premium went up circa 15% when she passed but she had only held her provisional license for less than 1 year.

You need to get a breakdown of the costs from the RAC as evidently the fee sounds high but could be made up of add ons (eg Legal Expenses, Breakdown etc) which cannot be cancelled after the cooling off period expired.