Motor Insurance cancellation fee

Quentin

vaio wrote: »

yep, and virtually all insurers will refund the unused 5 months of premium in line with the FOS rules.

When you cancel a motor policy, you will be lucky to find any insurer who will refund you in full the unused portion of the premium (less any cancellation fees). And you get none back at all with all insurers in the event of a claim during the policy year.

Were you correct, there would be no need to pay the high premium for short term temporary insurance. (We would buy an annual policy, use it for (say) 3 weeks then get 49 weeks refunded!)

Moon937

It appears that there may have been a misunderstanding whenthe insurance agent I spoke to, when I cancelled the policy, told me I would becharged a £45 admin fee. In ourconversation she omitted to mention that there would also be a refund, and fromwhich I assumed that the cancellation fee was in addition to my receiving norefund for the remaining 5 months premiums I had already paid.

When I told her that I would not pay the cancelation adminfee, rather than explain the calculation of that charge, and most importantly,how it would be deducted from any amount I would be reimbursed, she simply tookthe tack of stating the illegality of my then refusing to return thecertificate in an attempt to keep the policy running. She may have been correct in her comments, but she appears to have missed thr crux of my issue.
I have copied the relevant section of theRoad Traffic Act 1088 that deals with this issue below.

I have today received a letter from the insurer, requestingthe return of the certificate within 7 days, but also outlining that a reimbursementwould be calculated once it is returned, and that any cancellation fees bededuction from that amount. :T

147 Issue andsurrender of certificates of insurance and of security..



(1)A policy of insurance shall be of no effect for thepurposes of this Part of this Act unless and until there is delivered by theinsurer to the person by whom the policy is effected a certificate (in thisPart of this Act referred to as a “certificate of insurance”) in the prescribedform and containing such particulars of any conditions subject to which thepolicy is issued and of any other matters as may be prescribed. .

(2)A security shall be of no effect for the purposes of thisPart of this Act unless and until there is delivered by the person giving thesecurity to the person to whom it is given a certificate (in this Part of thisAct referred to as a “certificate of security”) in the prescribed form andcontaining such particulars of any conditions subject to which the security isissued and of any other matters as may be prescribed. .

(3)Different forms and different particulars may beprescribed for the purposes of subsection (1) or (2) above in relation todifferent cases or circumstances. .

(4)Where a certificate has been delivered under this sectionand the policy or security to which it relates is cancelled by mutual consentor by virtue of any provision in the policy or security, the person to whom thecertificate was delivered must, within seven days from the taking effect of thecancellation— .

(a)surrender the certificate to the person by whom thepolicy was issued or the security was given, or .

(b)if the certificate has been lost or destroyed, make astatutory declaration to that effect. .

(5)A person who fails to comply with subsection (4) above isguilty of an offence.

vaio

Quentin wrote: »

When you cancel a motor policy, you will be lucky to find any insurer who will refund you in full the unused portion of the premium (less any cancellation fees). And you get none back at all with all insurers in the event of a claim during the policy year.

Were you correct, there would be no need to pay the high premium for short term temporary insurance. (We would buy an annual policy, use it for (say) 3 weeks then get 49 weeks refunded!)

yep, they might try and not refund in full, luckily we have the FOS on hand to enforce fairness.http://www.financial-ombudsman.org.uk/publications/ombudsman-news/54/insurance.htm

Their view is that in the event of cancellation the refund should be generally pro rata less the inevitable cancellation fee.

In my view "generally" would mean that in the three weeks on cover example you gave I'd expect 11 months to be refunded, maybe dropping to 10 if time on cover spanned the end of a month.

As an aside and re cancellation after a claim is made, one of the sets of Allianz T&C says the following about cancellation within the cooling off period http://www.yourcoverinsurance.co.uk/...nce_policy.pdf

...If you cancel the policy, you are entitled to a refund of the premium that you have paid for this policy except where an incident has occurred which may give rise to a total loss claim in which case the full annual premium may be payable to us.....

To me this reads that if you cancel within cooling off period you get all the premium back (no time on cover charge) and this applies even if there is a claim made as long as isn't a total loss claim

rudekid48

Moon937 wrote: »

It is actually through BMW's own insurance service, which was one of the reasons I was so surprised.

BMW bike insurance is administered by Devitt, who are a Broker.

Moon937

Sorry but that's too deep for me!!!

Cazaly

Who governs what is regarded as a reasonable cost for a mid term cancellation. Could an insurer/broker charge £500 to cancel? I have used a broker 'One Business Insurance Services' who are part of Brightside Group. Thier cancellation fee three months into my motor policy is £75.00 which equates to 22% of the actual risk premium. In addition they added £25 legal cover which is non-refundable and which I did not need. They also recived a £55 new business fee which was added onto my policy which was actually a renewal. Their excuse? Its all covered in the T&C's in the recorded message at the beginning. I'm going to complain to FOS and write directly to the FSA, because these people are no better than the banks who ripped everybody off with PPI.
By the way, I didn't read the full message above but an insurance company has to refund the full premium in the cooling off period (14 days from policy commencement) unless a valid claim is pending/paid. I think brokers also have to abide by this rule too.

dunstonh

Who governs what is regarded as a reasonable cost for a mid term cancellation.

The FSA has no rules on figures are fair. The FOS in dealing with complaints will consider fairness and has published an example back in around 2005. It also gave guidance to what it would look at as fair.

It said that the refund of premiums should be relatively pro-rata although it did understand costs were higher at the start than near the end.

A charge for cancellation has no impact on the premium and back in 2005 they considered £50 as fair. So, its fair to say it would be higher than that now. That means someone with a small premium paying the same as someone with a high premium.

Thier cancellation fee three months into my motor policy is £75.00 which equates to 22% of the actual risk premium.

That is irrelevant. Explicit fess are explicit irrespective of premium paid. This is why they are considered to be fairer.

In addition they added £25 legal cover which is non-refundable and which I did not need.

A number of addons are often non-refundable. However, the service they offer continues beyond the policy. If you did not need it then you should not have bought it.

I'm going to complain to FOS and write directly to the FSA, because these people are no better than the banks who ripped everybody off with PPI.

The FSA will not consider your complaint as they do not do that. The FOS publications already give an indication of what they think. So, unless they are outside of their tolerance then you would expect an FOS rejection. If it is outside tolerance then you will expect success.

By the way, I didn't read the full message above but an insurance company has to refund the full premium in the cooling off period (14 days from policy commencement) unless a valid claim is pending/paid. I think brokers also have to abide by this rule too.

That is not correct. An insurer can charge pro-rata on premium for cancellations during the cancellation period as well as a cancellation charge. Brokers are also not required to refund their charge (if one paid) and can charge a cancellation charge as long as it is published and reasonable.

twhatmough

I had my car insured through IGO4. I changed my address and the company would not continue to insure my car. IGO4 want to charge me £70 for cancelling the insurance: I did not cancel it, the insurance company did. IGO4 then said they could insure the car for £2,500 as against the £300 I was paying, and if I accepted, I would not have to pay the cancellation fee! Obviously a good deal, then! These charges are outrageous.

DCFC79

twhatmough wrote: »

I had my car insured through IGO4. I changed my address and the company would not continue to insure my car. IGO4 want to charge me £70 for cancelling the insurance: I did not cancel it, the insurance company did. IGO4 then said they could insure the car for £2,500 as against the £300 I was paying, and if I accepted, I would not have to pay the cancellation fee! Obviously a good deal, then! These charges are outrageous.

Could have cancelled the policy then get a new policy elsewhere.

twhatmough

I did cancel the policy and got a good deal from Sheila's Wheels, but they still want to charge me £75.00. If they are meant to be brokers, why couldn't they find me a decent price?