Car Insurance Admin Charge for Change of Address

russelldaren

I found some old threads on this subject but they seemed to be inactive so thought i would start a new one.

I was recently charged £21 to change the address on my car insurance policy. I used the bank charges letter on the MSE site as a basis for complaining that the charge was excessive and disproportionate to the actual cost to the insurance company of making the change. The policy document did state that changes were subject to an admin charge of "up to £21", so I also complained that this wording was misleading as it might lead a reasonable person to believe that a minor change, such as a change of address, would attract a lesser fee.

What do you know I got my £21 back. A goodwill gesture.

raskazz

The fee was only waived for economic reasons, as dealing with the complaint would cost more then the goodwill.

However, your complaint is almost entirely without substance. The issue is unrelated to that of bank charges. Bank charge refunds are argued on the basis that the charges are a penalty for breach of contract. Insurance administration fees are not penalties for a breach.

A fee of £21 is most certainly not disproportionate or excessive IMO, and the FOS agrees.

I also don't see how the wording is misleading. It states that the charge can be up to £21. Most normal people people read the documents and budget according to worst case scenario.

Still, well done on getting your money back.

dunstonh

If you complain to the FOS, currently there is a £400 charge to the financial services firm. This is why they probably waived it.

However, an IFA has just won a court case against the FOS stating that this fee was unfair. The Judge agreed and said that if the complaint isn't upheld then the firm shouldn't have to pay.

It appears the consumer is going to lose this ability to bribe the financial services firm into paying up on threat of going to the FOS. Firms are now being encouraged to no longer pay the FOS charge pending the court case appeal. One cannot reasonably expect the FOS to win their appeal and there is already talk about the charging structure of the FOS being changed. This includes charging consumers if their complaint is not upheld. (I doubt that will happen unless the compliant is petty or frivolous)

raskazz

That's interesting dunstonh. Have you got a link to any more info on this case?

dunstonh

raskazz wrote: »

That's interesting dunstonh. Have you got a link to any more info on this case?

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=158666&d=340&h=341&f=342

http://www.citywire.co.uk/adviser/-/news/other/content.aspx?ID=292076

The judgements after this case on what happens next are all speculation. However, if the FOS lose the appeal, you cannot realistically expect them to continue as every financial services firm will take them to court.

The FOS have stated elsewhere (almost a veiled threat) that if they penalised those with upheld cases harder, it would be like introducing a target to have so many upheld cases.

It seems that claiming "unfair" charges works both ways. There was never a problem or question with the funding of the FOS until it started being abused for trivial and opportunistic complaints.

Steve1981

This has got me a bit - when you take a policy FSA guidlines state you are to be informed of any fees for ammendments - you have 14 days to cancel and receive a full refund providing no claims have been made.

You have entered a contract.

I am all up for getting money back from companies when they are in the wrong. But if this was the other way round you would be screaming breach of contract - it would be tantamount to the insurer just saying they arent paying out on a claim.

Its people getting money back off companies that they are not entitled to that that will have a knock on effect to everybody else - up go premiums.

really if you have agreed to pay the fee when you took the policy (which you did) then you should have no problems paying it.

Its almost blackmail 'if you dont waive my admin fee I'll go to the FOS' - should have stuck to their guns just to prove a point.

Can you imagine if everyone had been doing this when making changes?

russelldaren

Fair comment Raskazz & Steve1981.

I genuinely considered £21 to be excessive and wanted to let the insurance company know, and after all, if nobody voiced their disatisfaction, this kind of fee might go up to £40 next year.

I wasn't just chancing my arm.

Also the wording "up to £21" implies some kind of discretion with their fees or that there is a scale of charges which they are not prepared to reveal. I would prefer to know exactly how much a change is going to cost me and get a pleasant surprise if they decide to waive the fee. A change of address is probably a very common change, so why not just put a fixed price on it. I guess I am saying it's too vague for my liking and I didn't know exactly what I was agreeing to.

The £21 went towards my heating bill. British Gas unfortunately. Must dash, I just remembered why I came to this site in the first place.
http://www.moneysavingexpert.com/utilities/you-switch-gas-electricity

dunstonh

I genuinely considered £21 to be excessive and wanted to let the insurance company know, and after all, if nobody voiced their disatisfaction, this kind of fee might go up to £40 next year.

The FOS have ruled on cases upto £50 as being fair.

You have to remember that there is increasing pressure on financial services companies to have explicit charges for services and not bundle the whole lot in a premium. In real terms, car insurance is cheaper than historcial pricing. Having admin charges like this means that only those that make changes pay for them and it doesnt spread it to those that dont.

MarkyMarkD

The whole FOS charging system is inequitable.

There is no good reason for a system where individuals can make any number of vexatious and ill-founded complaints to a financial institution, refuse to accept perfectly reasonable goodwill offers and the like, and then take the vexatious case to the FOS, only for the innocent company to be charged for the privilege.

Whoever thought that was a reasonable or fair charging system needs their head examining.

A fair system would:

- impose no charge at all on companies which are found "innocent";
- impose a charge on consumers if their complaints are found vexatious and the company is found to have done everything it should have done to resolve the complaint - i.e. where a company has imposed a charge which was documented and legal, or has made a reasonable compensation offer for maladministration; and
- impose an increased charge on companies which are found "guilty" and have fobbed consumers off - possibly with a fixed minimum plus a proportion of the compensation agreed, rather than the current fixed charge, so that bigger transgressors pay more than smaller ones.

This system would remove the incentive on consumers to complain and, basically, blackmail companies into accepting their dubious claims; it would remove the incentive on companies to accept such dubious claims; and it would more fairly place the cost of the FOS on those companies whose practices are genuinely bad.

I can only imagine that the FOS is "scared" that if they move to this method of charging:

- they'll have to sack lots of staff because 90% of the complaints won't happen in the first place;
- they'll have to charge about £10,000 per successful claim, because their costs per successful claim will increase so much.

But if that were the case, there would be a huge incentive for companies to treat their customers fairly, which can't be a bad thing.

dunstonh

The FOS have said that they if change to a system where those at fault pay, it could raise the costs of an upheld complaint to around £2000 plus redress on top. They are concerned it may bankrupt smaller firms.

However, my personal view to that is tough titty. Being financially liable for your own advice is one of the best incentives for giving out quality financial advice (and services). Too many of those in financial services can act badly, give poor advice/service etc without having any real comeback on them at all. The liaiblity is currently spread with the good inevitably picking up the tabs for the bad.

If a change like that puts the bad ones out of business then so be it. We will be left with the better ones.

MarkyMarkD

I agree. Why should we have a system where the innocent subsidise the guilty?

If any business giving financial advice can't afford £2,000, they shouldn't be in business in the first place. How would they compensate anyone for anything if they made a mistake? The FOS fees (even at £2,000) would be the least of their problems if they mis-advised an investment or mortgage customer.

And FOS are presumably ignoring the feasibility of charging vexatious claimants when they are coming up with that £2,000 figure.

It doesn't work to partially reform the fee structure - it's necessary to charge vexatious claimants in order to manage the costs of the whole system down.