Insurance rip off in the Uk?

Question

My sons car packed up yesterday ,the engine blew up,the costs of repairing it was more than the car was worth,so he scraped it today.

On trying to cancel his insurance today he was told that he would have to pay £95 to cover adminstration fees to end the policy early.

Rip off or what,i asked what these costs covered, but they would not give me a break down of their costs involved.

They said that this charge is payable for all people who have been insured with them for less than 12 months,however if i stayed with them for more than 12 months this cost would not be payable!

Last year i change my car and on shopping around for a cheaper quote i ended up cancelling my insurance policy with a different company,i was only charged £4 to cover costs.

Should my son pay these rip off fees of £95 or should he fight them all the way?

there is no mention of £95 anywhere in the small print for an early cancellation fee.

Answer 1

Welcome to the real world. It is a sad fact but when the insurance was taken out this would have been in the small print. If he signed then he is stuck.
It gets worse, because the insurance companies talk to each other and share databases, to "prevent fraud" of course this will be shared as well and if not paid will make further insurance difficult.
Whether or not you pay them is up to you.

One thing is for sure, he wil be reading small print very carefully in future.


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Answer 2

Cancellation of a policy in the first 12 months usually incurs what are called "short period" rates. If there had been a claim in the period of insurance, the full annual premium may have been retained by the insurer. After the first full year of cover, pro-rata refunds (less a cancellation charge [usually between £10-£20]) are usually given, subject to no claims in the current period of insurance.

When the policy was taken out, the insurer should've issued you with a Terms of Business document (new FSA regulations) which detail all fees/charges.

You have no official recourse, provided you were given a copy of the TOB at inception or quote stage.

Answer 3

Assuming your son paid the full insurance premium then: was this fee charged by your insurance intermediary?

If so you should look for their Initial Disclosure Document which they should have given you when your son took out the policy and see what is states about charges. The information may be provided on their terms of business.

You MAY be able to argue that this amount is a penalty and as such unenforcable - similar to how the banks are having to refund charges.

I must admit £95 seems a bit steep - the highest I knew previously was £55.00. Did your son take out a policy with a cashback that had to be refunded on cancellation?

Do you wish to name and shame? You may put in a complaint against the insurer/ advisor - full details were provided when you took out the policy and if you do not receive a satisfactory conclusion request the FOS to take up the complaint - the insurer/ broker is bound by their decision.

For your information the rules about fees are found on the FSA website:http://fsahandbook.info/FSA/html/handbook/ICOB/2/10

Answer 4

You do not say how long the policy had been in force or if he paid in full at the start or by monthly instalments.

If for example he had the policy for 3 months and was paying by means of 12 instalments then he may not have paid the minimum. Reading your comments it seems that might be the case.

If he paid in full then just leave the policy in place until it runs out. There is no rule that says you have to cancel it and no charges apply would apply in that case.

Should he obtain another car before it expired then he would simply transfer it.

Answer 5

It would have been a good idea for you to publish the name of the Insurer, then we could all avoid them! Wasn't Budget was it?

Yes of course it's a rip off but, as everyone says, it's in the small print so you have to go with it.

You seem sure it's not mentioned in the policy document. If it really isn't then, make a complaint to the Financial Servies Ombudsman. They will investigate for you, and if you are right, you should get a refund.

Good Luck.

Answer 6

How can the third party claim from your insurers when you weren't even driving the car at the time? Your car was stolen so the little scumbag should be responsible! I can only think if your car was recovered,repaired and returned to you, your insurers will have taken that as a"claim" against your policy. That's may be why you've lost your no-claims bonus.

Answer 7

There is a charge as a policy is cancelled "short-rate". The amount of the charge varies from company to company, and jurisdiction to jurisdiction. In Manitoba, for instance, the charge is 7% at the start of the policy, and goes down a fraction of a percent for each day the policy is in force. For example, a $1500.00 policy cancelled the second day would cost about $105.00 in cancellation penalty, but it would be about $53.00 after 6 months, etc. Your penalty sounds exessive, but, if it is anywhere on the paperwork, in an information pamphlet, or otherwise available, is probably something you cannot fight.

Answer 8

I would like to say " fight them all the way " but it is near impossible to win against such a force that has laws of its own, I would suggest you try and "suspend " it and maybe put on another car later, if that does not work take out an insurance with some one else next time and put the name of the company on the web so we can all see it, Oh and you could inform your AA or RAC about them as well.

Answer 9

It does state that but you have to really be a legal expert to understand it.

If you don't pay up they can stop you getting car insurance in the future a kind of black listing.

It's harsh I know but thats the financial companies for you.

Why doesn't he continue to pay, if he hasn't got much time left on the policy.

Therefore he would get an no-claims bonus, and cheap car insurance in the future.

Answer 10

You need to check the Keyfacts document issued by the insurance arranger/broker. If this is not stated when the Terms of Business was issued at the time of purchase, then it is not legal. You would have grounds to complain to the Financial Ombudsman Service (FOS). However, you will need to follow the complaints procedure that is in force with your Son's end provider first.