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Insurance default charges

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sarah1980sarah1980 Forumite
450 posts
Looking for some advice please. Direct Debit failed in Sept for car insurance (insufficient funds). I rang them up and paid by debit card. They then added a fee of £24 to my October payment which also failed as tbh I had forgotten to put enough money into the joint account to cover the additional £24. They have now asked for an additional £12 on top of the £24 otherwise they are cancelling my insurance and sending me a default notice.

Does this seem fair? The car insurance is paid in instalments of £17 per month, so this month's payment is £53 due to charges. I don't have the extra £36 until I get paid next week, but equally don't want a default on my file.

Are these insurance companies governed by similar "fair charges" laws as the banks?

Any advice would be appreciated.
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  • dunstonhdunstonh Forumite
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    Does this seem fair?

    It doesnt seem unfair. You have created multiple admin events and most insurers have a charge for admin events. That is why premiums are lower nowadays.
    The car insurance is paid in instalments of £17 per month, so this month's payment is £53 due to charges. I don't have the extra £36 until I get paid next week, but equally don't want a default on my file.

    When you pay monthly, you are doing it under a credit agreement. It is effectively a loan. So, they have to comply with the disclosure requirements of the consumer credit act. This can lead to quite formal wording being used.
    Are these insurance companies governed by similar "fair charges" laws as the banks?

    There are no fair charges laws with the banks. Plus, the banks won the bank charges legal case back in 2009.

    The Financial ombudsman service publishes complaint outcomes made by the ombudsman and examples of complaints in its monthly publications. Charges by insurers have popped up once in its monthly publication some years back and that fee was £50 and the FOS rejected the complaint as it felt it was reasonable.

    The charges of £24 and £12 do not seem unreasonable. Most insurers publish their tariff online or send it out with the schedule. As long as it matches that, then they have done nothing wrong.

    it is important that you do not default. Not only as you dont want a default on your credit file but also because when insurance has been cancelled by the insurer, it becomes something you need to declare for the rest of your life and you would find most comparison site arranged plans will not offer a price when you say yes to that question.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • [Deleted User][Deleted User]
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    If they are threatening to default you after such a short sequence of non-payment, that suggests that you have had problems before now.
    Might be an idea to post on the "Debt Free Wannabe" board where you will find a wealth of support and information;
    http://forums.moneysavingexpert.com/forumdisplay.php?f=76
  • "If they are threatening to default you after such a short sequence of non-payment, that suggests that you have had problems before now."

    No, this is what amazed me, I have insured with them for 5 years and never missed a payment!

    I will never ceased to be amazed by these companies, £36 to re-take a Direct Debit and send a letter. The £12 is the same amount banks would "reasonably" charge but 3 x this seems unreasonable to me. Maybe because I am on a low income it hurts more, £36 is a week's shopping.
  • [Deleted User][Deleted User]
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    sarah1980 wrote: »
    No, this is what amazed me, I have insured with them for 5 years and never missed a payment!
    Contact them to arrange some kind of payment plan for the charges. If these are truly first "offences" they may even waive some or all of them.
  • dunstonhdunstonh Forumite
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    No, this is what amazed me, I have insured with them for 5 years and never missed a payment!

    Car insurance paid monthly is priced on sub-prime terms. it is usually expensive borrowing on par with credit card borrowing and they are typically less forgiving that conventional borrowing. Plus, the profitability on car insurance arrangement per policy is much lower nowadays. So, admin events like these can wipe out the profit. Hence the admin charge.

    You havent just had one loan payment missed. You have had two.
    I will never ceased to be amazed by these companies, £36 to re-take a Direct Debit and send a letter. The £12 is the same amount banks would "reasonably" charge but 3 x this seems unreasonable to me.

    It doesn't seem unreasonable to me. You have created two lots of admin that someone needs to pay for. It is either you or all the other policyholders. So, it is fairer that it is you. This is not £36 for one failure. It is £24 for the first and £12 for the second.

    I sympathise with your budget limitations and I am posting in a way to explain why they do this. Not to necessarily agree with it.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • NasqueronNasqueron Forumite
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    You could try asking them nicely to waive one of the charges as a gesture of goodwill given your previous good behaviour, no guarantees but you never know
    the concept of a United States of Europe is right.” Winston Churchill 1930
    I think that the Government are right to apply to join the European Economic Community...” -Winston Churchill 1961
    “The future of Europe if Britain were to be excluded is black indeed.”[FONT=&quot][FONT=&quot][FONT=&quot] - Winston Churchill 1963
    [/FONT][/FONT][/FONT]
  • magpiecottagemagpiecottage
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    sarah1980 wrote: »
    Are these insurance companies governed by similar "fair charges" laws as the banks?
    If you make a complaint, and push it to FOS, then you will find out, I suppose.

    On the other hand, as dunstonh says, the cost of lower insurance is that there is less scope for free extras on the admin.

    Given that FCA Principle 8 requires conflicts of interest between you and other customers to be fairly managed, there does seem to be an argument in favour of this. On the other hand, it also requires them to properly manage conflicts of interest between you and them so an excessive fee would be deemed a breach of the Principle.
  • ceedy1950ceedy1950 Forumite
    7 posts
    Just jumping in this thread for some advice about whether its worth trying a claim ??



    During the many years of my Mortgage ( all paid off a while back with my Credit card) another story in own right ;-)



    Because I chose to use my own preferred insurance company via my Job, C&G charged me a Monthly Fee for not going with their insurers through them .
    I was usng Royal Ins.. but after a dig about I found that Royal was also the Company C&G wanted me to use, but my costs were almost half that That C&G wanted to charge. despite arguing why the costs were greater and it being the same company C&G would not listen. So had tp pay the monthly fee for yonks.


    Could these fees be reclaimable .. ? ta.
  • zx81zx81 Forumite
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    I'm not sure what your complaint is about.

    You had mortgage insurance with your job, but another company charged you a fee? Is that right?

    What involvement did C&G have with your mortgage? Were they the lender? Was their insurance a condition of your mortgage?
  • SonOfSonOf Forumite
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    Because I chose to use my own preferred insurance company via my Job, C&G charged me a Monthly Fee for not going with their insurers through them .

    Most lenders did back then
    I was usng Royal Ins.. but after a dig about I found that Royal was also the Company C&G wanted me to use, but my costs were almost half that That C&G wanted to charge.

    it wouldnt have been the same policy or coverage though. Each distribution channel would have had its own version depending on what the distributor wanted in the policy.
    despite arguing why the costs were greater and it being the same company C&G would not listen.

    They would listen but they are correct to reject it.
    Could these fees be reclaimable .. ? ta.
    no. Nothing wrong with them.
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