Insurance cancellation fee for sold vehicle

moneyrob2

Hello,

Any advice appreciated…
I’ve just sold a motorbike for which I have 2 months insurance remaining. The annual policy (taken out 10 months ago) cost £90.  I called my insurer to cancel the policy who advised they would charge me £30 for the pleasure - a £45 fee less 2 months premium refund.

Is this reasonable? I stated that I’d just let the policy lapse at renewal to avoid paying £30 but was advised this was illegal.  I don’t expect any refund but I’m loathe to pay a total sum exceeding the original annual premium.  Can anyone advise the legality of allowing the policy to continue until it’s end?

TIA, Rob.

yessuz

why is it illegal? insurance policy is in your name, not vehicle reg plate.

only issue might be if bike, when sold by you, is not insured and new driver then get's in accident and can try to claim on your policy.

but I do not think there's a law which prohibits to pay for the service and not to use it.

Car_54

It's not illegal, AFAIK, but it's very risky.
If it isn't insured by the new owner, and your policy is still active, then your insurer will have to pay any 3rd party claims, and they will be entitled to recover the costs from you.

moneyrob2

Thanks guys.

Car_54 said:

It's not illegal, AFAIK, but it's very risky.
If it isn't insured by the new owner, and your policy is still active, then your insurer will have to pay any 3rd party claims, and they will be entitled to recover the costs from you.

Could that be true? Surely my insurance policy would be invalid for making a claim since the policy details are no longer correct. I don’t imagine I’d be liable for any costs if I’m not at fault personally (?).

I’d prefer to have the policy cancelled. Just seems daft that the insurance co. wants compensating for something in both our interests 

Aretnap

moneyrob2 said:

Thanks guys.

Car_54 said:

It's not illegal, AFAIK, but it's very risky.
If it isn't insured by the new owner, and your policy is still active, then your insurer will have to pay any 3rd party claims, and they will be entitled to recover the costs from you.

Could that be true? Surely my insurance policy would be invalid for making a claim since the policy details are no longer correct. I don’t imagine I’d be liable for any costs if I’m not at fault personally (?).

The policy might well be invalid, but the Road Traffic Act would still potentially require the insurance company to compensate third parties anyway. It's part of the system to ensure that innocent victims of uninsured drivers have some way of seeking compensation. The rough principle is that the insurance company with the closest connection to the offending vehicle pays; the Motor Insurers Bureau only pays out of central funds if the vehicle has no insurance whatsoever.

Following on from that, if your insurance company had to pay out for an uninsured rider because of a breach of the policy terms on your part (for example, because you hadn't cancelled or told them when you sold the bike) the insurance company could potentially come after you fir the money they'd had to pay out because of your failure.

In practice, if you've told them that you've sold the bike I suspect that what they'll do is cancel the policy whether you want them to or not, to avoid this risk. The question then becomes whether they can enforce the cancellation fee, and how hard they'll try to enforce it if you don't pay it. 

chrisw

I would say it's unusual. I've just cancelled mine with Quote me Happy at 11 months and although they charge a £50 cancellation fee, they have reduced this to match the premium refund of about £18.20. 

So I get nothing but owe them nothing which seems fair enough.

Sandtree

Aretnap said:
In practice, if you've told them that you've sold the bike I suspect that what they'll do is cancel the policy whether you want them to or not, to avoid this risk. The question then becomes whether they can enforce the cancellation fee, and how hard they'll try to enforce it if you don't pay it. 

From my experience they generally don't... when the customer gets ratty about the fees and says "just leave it" or whatever the agents normally take that as instruction and wont make an arbitrary decision to cancel it against the customers wishes. Given the long term impact of an insurer cancelling a policy against the customer's wishes its not something that's taken lightly. 

moneyrob2 said:

Hello,

Any advice appreciated…
I’ve just sold a motorbike for which I have 2 months insurance remaining. The annual policy (taken out 10 months ago) cost £90.  I called my insurer to cancel the policy who advised they would charge me £30 for the pleasure - a £45 fee less 2 months premium refund.

Is this reasonable? I stated that I’d just let the policy lapse at renewal to avoid paying £30 but was advised this was illegal.  I don’t expect any refund but I’m loathe to pay a total sum exceeding the original annual premium.  Can anyone advise the legality of allowing the policy to continue until it’s end?

More than a decade ago the regulators looked at cancellation fees and decided that generally anything up to £50 wasn't unreasonable. Given we've a decade of inflation to apply to that number and yours is under it then it probably would fall into the category of reasonable... the issue, though its acceptable, is the same fee applies if you cancel after 2 weeks as if its 2 weeks before the natural end.

Its not illegal for you not to cancel it but it will be a breach of contract and they will treat it the same as if you were allowing a random friend who's not named on your policy to ride your bike... if they have an accident they have to respond as RTA Insurers if there is no other insurance in force and they can reclaim their losses from you for you having allowed the situation to have happened. It is obviously rare but it does happen... there was a case on here not long ago and certainly I dealt with one case where we were recovering a 6 figure payout from a customer in similar circumstances.

sammynunes

Are you sure they will actually charge you the fee over and above your premium? It may be an employee who doesn't realise how cancellations work.

I cancelled a car policy with Halifax last year which had a £60 cancellation fee. It was cancelled with 6 weeks left to run and they just said there would be no balance left to refund due to it being lower than the cancellation fee.

moneyrob2

Thanks all.  I’m not at all confident the guy on the phone knew about the legality of the situation, or that the full £45 cancellation fee should be charged. I’ll try them again.
Interesting that others have simply had their policy cancelled with no fee when close to the end of the policy. This is what I’d expect as a fair outcome.

Sandtree

moneyrob2 said:

Thanks all.  I’m not at all confident the guy on the phone knew about the legality of the situation, or that the full £45 cancellation fee should be charged. I’ll try them again.
Interesting that others have simply had their policy cancelled with no fee when close to the end of the policy. This is what I’d expect as a fair outcome.

What is their normal admin fee for changes?

Personally, I've always felt it would be fairer that the cancellation be capped at full term premium + standard admin fee but its not how the majority work.  

I wouldn't bother picking up on the "legality" aspect personally, the above answers have already given you the true picture above. Call centres agents are generally not brilliantly trained and can be lax with their language as they aren't lawyers and may miss state that breach of contract is illegal etc.

moneyrob2

Indeed. The responses above have highlighted the potential risk and I’d be far more comfortable cancelling the policy and cutting any ties. I understand the insurers wanting compensation for policies cancelled but it’ll sting to pay an amount higher than the total premium itself.  Hopefully the next agent will be more lenient!