Vehicle insurance cancellation fees

StesBes

Hello all, My first submission.....just cancelled my Motor Insurance for a motor home well before the term was up. The premium was £309.74 and I was just short of 6 months into the insurance period. I did not, of course, expect 50% of the premium to be returned and fully expected an admin charge to be imposed for early cancellation but I have been offered just £19.50 back! I was shocked that the admin charges amounted to £135.00 (give or take). When I queried the penalty I was told there was an admin fee from the broker and the underwriter 'as stated in the terms and conditions' and that they equated to £110.00...(this still left a further £25 or so unaccounted for!). I looked on previous forum complaints and only saw one dated 2009 that seemed similar. There are no specific details of the amount of penalty/admin charges that will be imposed on cancellation. This appears to me to be a very unfair and unreasonable practice when my insurance is an online policy and cancellation does not involve reams of paperwork. I have sent a letter of complaint to the company concerned (Insurd Ltd) (correctly spelt) and once I have their final written response I will contact the Insurance Ombudsman as the latter advises. I suspect many of Martin Lewis' subscribers have fallen victim to this questionable business practice but isn't it time, especially in the current climate, to call out these insurance companies for their 'heads we win, tails you lose' approach? I honestly feel like I’ve been robbed. I welcome any advice or comments from similarly aggrieved victims.

BoGoF

Would help if you said who the broker and underwriter is.

Mr.Generous

For £19.50 leave the policy running. Not worth cashing in - who knows you might even get the benefit if the worst happens. I don't suppose any insurance policy that runs for a year pays back a decent chunk unless you take a new policy, none of mine ever have.

k12479

Mr.Generous said:

For £19.50 leave the policy running. Not worth cashing in - who knows you might even get the benefit if the worst happens. I don't suppose any insurance policy that runs for a year pays back a decent chunk unless you take a new policy, none of mine ever have.

Here is the potential 'benefit' of the worst happening: https://www.dailyrecord.co.uk/news/scottish-news/scots-biker-insurance-hell-after-4141840

DullGreyGuy

StesBes said:
when my insurance is an online policy and cancellation does not involve reams of paperwork.

It's not a fee for processing the cancellation, most of the fee covers the acquisition costs. You bought a 12 month contract for which they were happy to pay an aggregator £75, pay google £10 a click etc etc. Wanting out early they want to recoup the proportion of those costs. For simplicity rather than individually calculating all fees they use the average, the average person cancels around month 2 so you end up with 5/6ths of the costs. Generally it's considered fairer to charge those that cause the issue than simply increase everyone's fees to cover the DAC on those that cancel early. 

StesBes

So what you are saying is all insurance policies are rolled into a convenient ball and everyone is treated equally. This makes it convenient for the insurance broker to offload any risk of having to refund anybody who no longer needs the full year’s cover. When I entered into the contract the extent of the cancellation charge was not made clear. To weight the charges so heavily against me is clearly unjust. I will speak with the Ombudsman next. Although I suspect this will be like asking the police to review the police. This process is completely wrong and will, one day in the not too distant future I sincerely hope, be highlighted and stopped. 

DullGreyGuy

StesBes said:

So what you are saying is all insurance policies are rolled into a convenient ball and everyone is treated equally. This makes it convenient for the insurance broker to offload any risk of having to refund anybody who no longer needs the full year’s cover. When I entered into the contract the extent of the cancellation charge was not made clear. To weight the charges so heavily against me is clearly unjust. I will speak with the Ombudsman next. Although I suspect this will be like asking the police to review the police. This process is completely wrong and will, one day in the not too distant future I sincerely hope, be highlighted and stopped. 

Why were the fees unclear? The policy book will have stated the terms of cancellation, for example DL states:

We’ll charge for the time you’ve had cover, plus an administration fee, and refund any remaining premium paid.

If you look at the schedule of your policy it will say what the administration fee is, think DL at the moment is £48.


If you wanted the number to be calculated explicitly for you at the point of cancellation then no one would be able to tell you what the value is until the day you call to cancel. By treating everyone equally it is possible to fix the fee (£48 in DL's case) and therefore you can know before even buying the policy what it will be if you cancel it on day 20 or day 300. Surely that certainty and transparency is much better? Certainly the Ombudsman believes its fairer.

dunstonh

So what you are saying is all insurance policies are rolled into a convenient ball and everyone is treated equally.

Which is entirely logical and sensible and the way the FCA like it.  They do not like different customers being treated differently except where there are special needs or a service diferential.

This makes it convenient for the insurance broker to offload any risk of having to refund anybody who no longer needs the full year’s cover.

The broker has suffered the same costs whether people stay to the end or cancel during the term.

 When I entered into the contract the extent of the cancellation charge was not made clear.

That is probably unlikely.   Possibly, but unlikely.  Most provide details on cancellation charges on application or a link to their cancellation terms for you to read, if you choose to.  They are also normally in their initial supplied documents for you to read.

 I will speak with the Ombudsman next. Although I suspect this will be like asking the police to review the police. 

A bizarre thing to say given there is no commerical relationship between providers and the FOS.   

This process is completely wrong and will, one day in the not too distant future I sincerely hope, be highlighted and stopped.

The FCA likes fixed fees rather than percentage.   So, if anything, the direction of travel is against what you want.

Motor home insurance doesn't have the large market of household or motor.  So, administrative tasks do not get the same element of cross subsidy.    Another way of looking at is if you would be willing to pay higher premiums each and every year for other people cancelling their policies even though they have nothing to do with you.