cancel policy in cooling off period

Mistermeaner

hi

took out insurance on our car with RAC, paid last fri 12th may, for policy starting1st june

Contacted current insurer today to prevent auto renewal and they made me an offer which is £100+ better than RAC - so i accepted

I contacted RAC to cancel in what i understood to be the 14 day cooling off period (5 days after paying, for a policy which doesn;t start for 2 weeks). They agreed to cancel but want to charge me £25 fee, advising there is no such thing as a cooling off period

I've asked to be escalated as a complaint but wanted to understand where i stand - i thought there was a statuatory cooling off period in which you can cancel without penalty?


Thanks

Car_54

Money Supermarket say:

"But you will be charged for the time when the policy was active and you may also have to pay an administration fee, so check the terms and conditions of the policy.

The cooling-off period starts either when you receive your documents or when the cover starts - whichever is later. Some insurers also offer a longer cooling-off period than 14 days."

Mistermeaner

CHAT TRANSCRIPT:

Guest    hi please cancel my policy and refund the payment          

 

Aisha     No problem, no further changes can be made before the 01/06 

 

Aisha     Just to let you know your price has been calculated by us and includes the sum required by the underwriter.               

 

Aisha     This cancellation has incurred a fee of £25.00.   

 

Aisha     Total due for period of cover 01/06/2023 to 01/06/2023 = £0.00 Payment received so far = £576.92 arrangement fee of £25.00 applied Balance of £551.92 will be refunded 

 

Guest    it is still within the cooling off period

 

Aisha     We do not have a cooling off period, sorry as stated in your documents we have a cancellation fee within the first 14 days and after 14 days as well     

 

Guest    no there is a statatory cooling off period

 

Aisha     Sorry that is not the case I'm afraid          

 

Guest    the policy has not started yet and was taken out 5 days ago          

 

Aisha     Yes but when you set up the policy it is stated in the terms and conditions there is a fee charged from when you take out the policy. 

 

Guest    what terms and conditions?

 

Aisha     The terms and conditions in your policy when you take out the insurance               

 

Guest    where specifically does it state this?        

 

Aisha     In your policy documents under cancellation fees              

 

Guest    please advise the exact wording There is a statuatory right to a cooling off period of 14 days for car insurance               

 

Aisha     Sorry there is no such thing, it is based on your insurance company terms and conditions

 

Guest    i wish to register this as a formal complaint and request cancellation plus a refund in full 

 

Aisha     We charge all our customers a fee within 14 days and after 14 days           

 

Aisha     No worry I can log this as a complaint for you, with our customer relations team 

 

Aisha     I will have to cancel this policy for you now          

 

Aisha     At the moment you will get a refund minus the cancellation fee. The relevant team will get your complaint and be in touch        

 

Aisha     This has now all been cancelled and I have logged the complaint for you with the relevant team   

 

Aisha     They will write to you    

Guest    by post or email?             

Aisha     Email    

Aisha     Thank you for your time, have a lovely rest of the day.

sheramber

it is an admin fee or the work involved in setting up the policy and processing the payment.

DullGreyGuy

You do have a cooling off period but you have made the mistake of assuming its free to cancel during the cooling off period... for most insurers it isnt and legally doesnt have to be. The fees just need to be proportional to the average cost of a cancelled policy. Well over a decade ago the regulator asked us for our calculations that showed on average a cancellation costs over well over the £50 we charged. So at £25 a decade later you have gotten off fairly lightly.

The transcript is wrong, it should be that there is no "fee free cooling off period", but thats a minor point. They are right in being able to charge the fee.

For future reference... speak to your own insurers/brokers BEFORE buying the replacement!

oldagetraveller1

"We reserve the right to make a charge to cover the cost of setting
up your policy where your cover is cancelled within the cooling off
period - £35.99 for Renewals and £49.99 for new business policies.
This period is effective from when you accept your application to

purchase the insurance policy"

The above is from my Classic Car insurance broker. £25 is a comparitive bargain!

Brie

I'm wondering what needs to be paid for when it's normally a policy that's set up online, without any contact made with an individual and with no paperwork being sent out.  If it ever gets to the point that  one can log on and cancel prior to the policy actually starting with the mere press of a button then there should be absolutely no fee.

Yes they have to pay for the whole IT system to be in place of course.  And for someone to sit at the end of a phone line to take calls.  But £25 does seem excessive.

dil1976

Brie said:

I'm wondering what needs to be paid for when it's normally a policy that's set up online, without any contact made with an individual and with no paperwork being sent out.  If it ever gets to the point that  one can log on and cancel prior to the policy actually starting with the mere press of a button then there should be absolutely no fee.

Yes they have to pay for the whole IT system to be in place of course.  And for someone to sit at the end of a phone line to take calls.  But £25 does seem excessive.

There is a lot involved in setting up a IT system.

• Initial siting of it
• Designing it
• Insuring it
• Securing (PC security) it
• Software design
• Maintaining it
• Keeping a maintained temperature in room it is sited
• Keeping it running 24/7
• GDPR compliance

So £25 per policy doesnt seem that much in the grand scheme of it does it?

Dave_5150

Here's a copy and paste from their online FAQ's

"If you choose to cancel your policy within 14 days of receiving your policy documentation, we will charge you an arrangement fee of £25, plus time on cover. If you cancel more than 14 days after receiving your policy documentation, we will charge you a fee of £55, plus time on cover."

So you will be charged £25 to cancel, but based on your quoted figures you will still have saved £75 by not continuing with RAC.

DullGreyGuy

Brie said:

I'm wondering what needs to be paid for when it's normally a policy that's set up online, without any contact made with an individual and with no paperwork being sent out.  If it ever gets to the point that  one can log on and cancel prior to the policy actually starting with the mere press of a button then there should be absolutely no fee.

Yes they have to pay for the whole IT system to be in place of course.  And for someone to sit at the end of a phone line to take calls.  But £25 does seem excessive.

There is a lot of commissions also involved, find their website from Google and theres a reasonable chance its a click on an ad that has easily cost them £20 or more. Buy from an aggregator like confused.com and its £50 or more. The former will have no refund for you going onto cancel, the later may have a partial refund depending on the terms between the site and the broker/insurer. 

Various softwares and databases all have a per policy fee associated with them

If the policy has incepted when you cancel during the cooling off period it could well be that you've had an accident in those days on cover that they dont know about yet. They have to pay actuaries to calculate the IBNR liability for that and hold the appropriate reserves. Similarly in certain circumstances if you didnt buy new insurance after cancelling the policy then your cancelled insurer may be required to settle a subsequent third party claim and so another reserve is required to be held against that risk. 

A good many years ago a former client was asked to calculate the full cost of selling 1 policy as a direct insurer and the result was well over £100. The same insurer at the time had a total expense ratio of 31% with an average premium being about £630 and so just over 50% of the cost of running the company (exc claims) was the cost of winning business.

gordieg0rd

I've just been caught out.  I do as we're told by Mr Lewis and shop around for car insurance about 20-ish days before due.  However, in the current insurance premiums price hikes, I started a little earlier, kept my eye on things and then bought when at a 'reasonable cost'!  I today found RAC were about £50 cheaper so thought I'd try that but wanted to check any cancellation fees/cooling off periods which I now learn are very different things,  I shall NOT be caught out again.  I will have to stay with my broker arranged insurance due to their £50 cancellation fee and be more careful next year and hope premiums come down and this 57 year-old wont have to pay another £175-a-year more like this year.  Suffice to say, Yoga Insurance will not likely receive any of my hard earned cash ever again.