Admin charges on amending car insurance policy

swinstan

I have just been charged an admin fee on making an amendment to my existing car insurance. When I added my learner daughter to the car I expected a hefty policy increase but I didn't expect £25 charge just to make the change. The company is 'Budget' Car Insurance. Is this normal? Or a way of them trying to keep policy costs down? Also, is it legal? Might it fall into the same category as the banks charging more for administering your account than it costs them? It surely cannot cost them £25 to make such a change.

GavB79

I've just been charged £45 'admin' to cancel a policy mid-term! The car failed its MOT so I'm taking it off road; I don't see how the insurance co. lose out because I paid my premium up to this point and they know I'm not going to have an accident now so they get to keep that money anyway.

_Andy_

Yes it probably is a way of keeping policy costs down.
Yes it is legal.

dunstonh

I didn't expect £25 charge just to make the change. The company is 'Budget' Car Insurance. Is this normal?

Why didnt you expect a charge for paying someone to do some work?

Yes its normal and £25 is quite reasonable. £50 is generally considered the point where it is unreasonable.

Or a way of them trying to keep policy costs down?

Part of it is that. Car insurance premiums are historically low in real terms. More of the admin related costs have been taken out of the premium and charged as and when used.

Also, is it legal?

It is legal and logical. it is also the favoured way of the FSA. Explicit charging is preferential to implicit charging although it can take a while to get used to.

Might it fall into the same category as the banks charging more for administering your account than it costs them?

No. Plus that isnt the reason the banks are under review. That applies to penalty charges and not admin charges.

It surely cannot cost them £25 to make such a change.

The actual cost of the transaction in pressing the buttons doesnt cost £25 but add up all the costs there are to allow that button to be pressed and it does add up. Plus insurers are commercial entities and not charities. They have a responsibility to return a profit to the shareholders.

I don't see how the insurance co. lose out because I paid my premium up to this point

Because their profit margin is based on you paying the annual premium and not 3-6 months worth.

GavB79

dunstonh wrote: »

Because their profit margin is based on you paying the annual premium and not 3-6 months worth.

You've conveniently taken my comment out of context. Their profit margin is based on me paying the annual premium factoring in the risk of a claim. If there is zero risk of a claim (with 8 months paid), their margin is increased. But hey ho, yes it's frustrating on top of having to take a car off the road, but yes it's business after all