Extortiionate cancellation charge for home insurance

1981trouble

I have a policy with Swinton and the cancellation charge is £50 (the remaining term is 3 months and I owe £21 in remaining repayments so it is cheaper to leave it running!).

I believe the £50 is an unfair term of the contract and am writing to them asking them to advise how this is a reflection of their true costs.

Just wondering if anyone else has had issue with this and found they can fight it?

rudekid48

You will have agreed to this when you bought the policy so your best bet is to put your objection in writing as a formal complaint and see if they will do anything as a gesture of goodwill.


If you are not satisfied after you've followed their complaints procedure, you do have the option of escalating to the FOS but it is highly unlikely that your complaint would be upheld unless you can prove that the £50 was not published up front..

dunstonh

I believe the £50 is an unfair term of the contract and am writing to them asking them to advise how this is a reflection of their true costs.

And based on your knowledge of insurance pricing, why do you think it is unfair?

Just wondering if anyone else has had issue with this and found they can fight it?

It is an issue with anyone that chooses to buy cheaper premiums with admin and cancellation priced removed from the premium but charged explicitly.

The FOS publications have covered this and showed the rejected a complaint on £50 as they considered the fee on that occasion was reasonable.

If you dont like explicit charging/lower premium then the way to fight it is not to buy insurance on that model but go with the no explicit charges/higher premium model and pay more each year instead. Seems a bit silly to argue about charges you agreed to when you bought the policy. However, I suspect Swinton will choose to not levy it as its cheaper to do that than argue the case.

1981trouble

Thanks for your opinion, I agree I did sign the contract they stipulated and I missed that fee as it wasn't with the other fees.

My logic was that since the telephone/broadband providers were taken to task over high cancellation fee's and are now required to charge significantly less then that has set the precedent for other companies also to need to justify their fee. Given there is no material loss (eg needing to return any equipment) to a cancelled policy and a cancelled policy is not stopping them taking any other policies with other people it is purely the loss of premium therefore the financial costs for cancelling a policy must link primarily to administration costs which should not cost £50 (less than an hours admin to open a file and press cancel so even once you add on generic overheads it shouldn't be anywhere near £50).

According to the “Unfair Terms in Consumer Contracts Regulations 1999” an unfair term includes
· [FONT=&quot]a term which tries to make you pay more than is needed to cover the trader's losses if you cancel the contract[/FONT]
· [FONT=&quot]a term that makes it very difficult for you to end a contract - for example, a term making you pay high termination charges or give a long notice period.[/FONT]

My question was not whether you thought I was stupid for signing up to a policy but whether anyone else had had success with challenging this who could advise me.

InsideInsurance

The ombudsman and OFT do allow for average losses. Whilst you may be in the last period of your policy many cancel earlier on within their 12 months. Rather than differentiate between customers and have a complex formula that people have to apply the regulators accept a universal figure that effectively is cheaper than the loss for early cancellers and high for late but on average is at or below the true cost

dunstonh

My question was not whether you thought I was stupid for signing up to a policy but whether anyone else had had success with challenging this who could advise me.

Already answered. However, if you intend to introduce the FOS, then expect to lose. They have in their publications examples that have rejected complaints on that basis. Here is a recent judgement on a similar case:
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=35851

Quentin

dunstonh wrote: »

Already answered. However, if you intend to introduce the FOS, then expect to lose. They have in their publications examples that have rejected complaints on that basis. Here is a recent judgement on a similar case:
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=35851

But you don't always "lose" even when you should "expect" to!

The FOS took this complaint on board meaning that the insurer didn't nip it in the bud by making a goodwill gesture to the policyholder to end the matter.

Although they ultimately won, it will have been at a much greater cost than the £50 complained about.

There will have been expensive management time involved in defending the complaint and supplying the FOS with justification for the charge. Not to mention the FOS fee to the Insurer for handling the complaint (£550)

There is plenty of anecdotal evidence that shows some Insurers will take the Goodwill Gesture route over comparatively small sums rather than spend far more defending the complaint even if they win!

Whereas the OP and any other policyholder has nothing whatsoever to lose by escalating the complaint - they never have to pay whatever the outcome.

InsideInsurance

It depends what a company under the FOS fears more, the ~£500 fine for an unjustified complaint going to the ombudsman or opening the flood gate of people realising that any claims for £100 compensation will always be paid because it being less than the fee for defending.

Some companies certainly take the short term commercial view over weighing up whats being asked for -v- fees irrespective of what is "right" and others will stick to their guns and let you take them to the ombudsman for less than £10.

Evidently the customer doesnt pay directly but indirectly all customer pay for the FOS service as the more the operating cost of a business is the higher they charge for their products

dacouch

If you send a polite and concise well worded "Official Complaint" to Swinton you have a very good chance of them waiving the fee. There have been q fair few posters on MSE who have complained and had the £50 fee waived by Head Office.