£75 fee just to renew your car insurance
DRIVERS face a raft of hidden fees when renewing car insurance, with providers charging fees of up to £75 just to roll over a policy for another year, Money Mail can reveal.
Annual motor insurance continues automatically so you don’t drive uninsured accidentally — yet customers, who find a cheaper deal during a two-week ‘cooling-off period’ when the automatic renewal is triggered, are being billed £45 if they want to switch.
And if you forget to tell insurers of a small change to your policy before the automatic renewal — such as a change of address, adding a family member to the policy or raising the number of miles you expect to drive — some firms will charge £60.
It comes as insurers face criticism for hiking prices for loyal customers at renewal.
Average premiums have soared by a fifth in the past year to a record £690, according to motoring organisation the AA, with insurers blaming controversial government reforms to personal injury compensation, tax rises and bogus whiplash claims.
The Mail also told this month how insurers are pocketing millions of pounds by charging customers £300 a year more to pay monthly. Many motorists may have no idea they face administration fees to roll over a policy. Often these fees are in the small print of policy documents, or terms and conditions on insurers’ websites, although firms claim they do make customers aware. They also say the fees cover the cost to the firm of setting up and cancelling policies.
Martyn James, of complaints service Resolver, says: ‘Many of these so-called admin fees are unacceptable and don’t reflect the amount of work involved. Drivers are routinely ripped off at renewal, paying hundreds of pounds more than those who shop around. It isn’t right they should be punished for trying to move to a cheaper deal.’
Principal Insurance, for example, demands up to £75 to renew car insurance. 1st Central charges £50, Swinton £25, Hastings Direct £20, Saga £20 and Collingwood Young Driver policies, £65.
Insurers argue all firms charge renewal fees but some include the cost in the overall premium, rather than separating the fee.
A spokeswoman for 1st Central says many of its rivals ‘wrap arrangement fees and commission within the total premium’. Hastings Direct and Collingwood’s new and existing customers pay the same fees.
A Saga spokeswoman says: ‘The renewal fee does not alter the price customers pay.’ It’s just itemised so the customer can clearly see what they are paying for, she explains.
An Association of British Insurers spokesman says firms charging renewal fees tend to be those whose policies are underwritten by another insurer. He had not heard of any UK-based member charging to renew.
Almost all firms levy a fee if customers cancel their policy before their contract ends. But some are even charging if drivers cancel within the 14-day cooling-off period.
Under the rules, firms may charge an admin fee plus a proportion of the premium for cover provided until cancellation. This should be explained in the terms and conditions.
The Post Office, for example, charges customers £30 if they cancel within 14 days of the policy starting.
This is on top of a deduction for the days of cover given. It means if a motorist cancels a £500 policy within ten days, they will pay about £44.
If you have a telematics deal — where a black box is installed in your car to monitor your driving — you could pay even more. Admiral charges new customers £125 if they cancel in the cooling-off period and the box is fitted. Existing customers pay £25. Wise Driving charges new customers £75, but nothing if you are renewing. Other firms charging fees to cancel in the cooling-off period include Aviva, Endsleigh, esure, Legal & General, LV=, Debenhams, Saga, SunLife, the AA and Zurich. Fees range from £25 to £45. Saga charges just £5. Firms say the fees are explained to customers. Many say that if they didn’t separate them, others would end up paying for those who cancel. Most insurers also charge for changes to existing policies. Fees vary.
Debenhams charges £50 to £60 for a change to policy. Aviva charges just £18 for changes by phone but only if the new information leads to an amended premium. It doesn’t charge anything for changes made online.
Most firms say they will not charge extra for changes made at renewal.
A Debenhams spokeswoman says these fees are ‘fully explained to customers at the time of purchase’.
Steve White, British Insurance Brokers’ Association chief executive, says: ‘General insurance brokers represent their customers and provide a service to them for which they can seek a fee. However, as regulated entities they are required to provide customers with details of any fees or charges made.’