Car insurance cancellation fees

systemparadox

Hi. A friend of mine has got into a terrible situation with car insurance and I'm looking for advice.

My friend pays for her insurance monthly. Due to what I believe to be an error on the part of the insurance company one of the payments was taken at the wrong time and bounced.

It took several weeks for them to send any notification that this had happened, and when they did, it was merely to inform her that they had cancelled the policy and she was now uninsured. They didn't ring up or provide any opportunity to retry the payment, they simply cancelled the whole policy. Annoying, and very inconvenient, but fine, whatever.

However, what really takes the biscuit here is that a few days later they somehow managed to take over £1000 straight from my friend's bank account. Again, no notification whatsoever. Apparently this is a "cancellation fee". My friend had to phone the bank and request that they reverse the transaction (for a fee of course).

As far as I am concerned this is nothing short of theft.

Some questions:
1. Why on earth is the cancellation fee so high?
2. Is that even legal? Surely there's some sort of limit for this?
3. Does anyone have any theories on how a £130 monthly insurance payment will bounce when there are insufficient funds, but the bank will do nothing to stop a £1000 cancellation fee when there are even less funds available?
4. What options do I have to fight this?

Any advice would be greatly appreciated. If anyone can supply any info on laws/regulations for this kind of thing that would be most helpful.

Many thanks.
Simon

dunstonh

However, what really takes the biscuit here is that a few days later they somehow managed to take over £1000 straight from my friend's bank account. Again, no notification whatsoever. Apparently this is a "cancellation fee".

It wont be a cancellation fee. Cancellation fees are typically no more than £50. If it is in the £1000 range then it clearly has to be something else.

1. Why on earth is the cancellation fee so high?

Its not. It could be unpaid premium owed.

2. Is that even legal? Surely there's some sort of limit for this?

Charging what you owe is legal. However, as there is some confusion here as to what the £1000 is, it is best not to comment on legality.

3. Does anyone have any theories on how a £130 monthly insurance payment will bounce when there are insufficient funds, but the bank will do nothing to stop a £1000 cancellation fee when there are even less funds available?

Depends on the balance of the account when the transaction was authorised.

4. What options do I have to fight this?

First thing is to find out what the charge is and how it is broken down. Until you know what the charge is for, it is difficult to know whether it is right or wrong.

One this is clear, a £130pm premium paid monthly but cancelled early on should not result in a £1000 deduction. You would expect something like the following:
1 - cancellation charge in the region of £25-£50
2 - unpaid premium due - relatively pro rata for every month not paid
3 - charge for any non-refundable add ons that were bought (not everything can be cancelled. legal expenses, breakdown cover are a couple of examples which are often non-refundable)