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Car and household insurers rip us off like banks

A new report from Which? reveals how some insurers are imposing extortionate administrative charges on car and home insurance policies.

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by Lorna Bourke on Sep 22, 2010 at 00:01

A new report from Which? reveals how some insurers are imposing extortionate administrative charges on car and home insurance policies.

Don't I know it!

This report from Which? Money strikes a particularly personal chord with me. Insurers never seem to learn and the latest scam to be exposed is extortionate administrative charges on policies. Minor changes to car and home insurance policies are costing consumers as much as £55 a time according to the consumer champion's new research.

Back in June of last year I paid for my daughter’s car insurance as a birthday present and the premium of £442, payable to Yes insurers, was debited to my credit card. But in November of last year two debits appeared on my credit card bill for Yes insurance for £15 and £34.96.

I queried this with Yes which maintained that it was because the date of the purchase of the car was wrongly recorded as June 2007 rather than the correct date of August 2007. I wrote saying this could not possibly alter the risk as Yes did not insure the car until June 2009, that the charges were unjustified, that I wanted them refunded and – most importantly – on no account should Yes make any further debits on my credit card account. Needless to say, all to no avail.

Abuse is widespread

And now it would appear this type of rip off practice is widespread. The Which? survey found that seven out of ten car insurance providers and one in three home insurance providers charge customers administration fees averaging £21 for changing details on their motor policy like marital status or address with an average charge of £18 for amendments to household policies.

But some insurers are charging much more – young driver specialist, I-Kube, charges £55, while home insurer Bluefin has a £35 fee. These are ridiculous charges for amendments which cannot take more than five minutes of anybody’s time. Clearly policyholders should expect to pay something for duplicating policy documents, but some insurers are charging £30 for additional copies, according to Which?

‘Whether it’s £30, £55 or an £85 fee, insurance companies are going to have a hard time trying to justify the exorbitant charges they’re billing for routine tasks such as changing an address on a policy or providing duplicate policy documents,’ said Which? chief executive, Peter Vicary-Smith.

Bank type behaviour

This smacks very much of the sort of £30 a time fees the banks were imposing for writing computer generated letters telling customers that they had exceeded their overdraft limit. Many have now reduced their administrative fees.

‘It’s about time insurance companies start treating their customers fairly and make administrative charges proportionate and transparent,’ said Vicary Smith.

Surely, the premium should cover reasonable administrative charges. If not, the headline premium rate is totally misleading and the comparison websites, where most people now buy their motor insurance, should put a warning on their quotes.

Which? Money analysed 151 car insurance providers and 180 home insurance providers in July 2010 and found that 105 of 151 car insurance providers charge policy amendment fees and 60 out of 180 home insurers charge policy amendment fees. Two thirds of car insurers and one third of home insurers charge cancellation fees. Debenhams, Igo4 Insurance, Masterquote and MRL Insurance Direct charge £85 cancellation fees. The average cancellation fee for car insurance is £40 and £31 for home.

To make matters worse, consumers are losing significant percentages of their premiums and face fees of up to £85 for cancelling insurance midway through their policy term. According to Which? many insurers calculate the refund based on a system of short-term rates. This means that if you cancel in the third month, you might only get back 50% of the annual premium, 20% after six months, and nothing at all for those who cancel after nine months. Householders and motorists would do well to pay their insurance premiums monthly – even if there is a small charge. If they subsequently cancel, they have only paid for the cover they have enjoyed.

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18 comments so far. Why not have your say?

My experience also.

Why doesn't the insurance regulator look into this? If there was a league table of the worst offenders on the web, then consumers could boycott them.

Alternatively, maybe web comparison sites should take up the cudgels on this, so that it forms part of the consumers' evaluation criteria.

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Absolute rip off! Recently changed our car insurance as we were adding our 17 year old daughter to the policy, who is now learning to drive, and the current Insurer wasn't competitive. We paid £376 in advance for the full year for an Insurance policy which runs until 30 March 2011 and when we cancelled it 2 weeks ago, were told we would only receive £37 refund - the rest is being kept for admin charges!!!!!

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Lorna,

I'm not sure if you have tried talking to your Credit Card company about these unathorised debits. They may have more luck getting your money back.

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Another good one is to let them automatically renew your insurance, what we do is to go back into their website and get a completewly new quote and then call them up and demand the revised quote. We on average have saved £200 each time we do our car and espeically the house insurance, and get some extras for free.

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Most things involving insurance companies are a rip off. There was a time when you took out fully comp car insurance and that was that. Now it's a minefield with a load of "upgrades" ...

1.legal cover extra,

2. various levels of legal cover extra as the standard one you opt for is worth diddly squat,

3.no claims bonus protected extra,

4.courtesy car extra,

5.imposed excesses so high that if you own an older car then you may as well write it off,

6.oh you can take out another policy to cover the exorbitant excess at an extra cost only to find it covers a maximum of £300 but read the small print because it wont pay out on claims for less than £300!!

The list goes on and on.

My car insurance renewal this year started a month in advance so I had time to analyse what was being offered and resulted in my paying almost the same as last year even after another years accident free motoring under my belt.

I was quoted a renewal of £480 with Kwikfit which was a whopping £130 increase on last year. Rang them and they agreed a 40% hike was a lot but they couldn't get much lower.

Swinton quoted me £680 on a follow up call via a comparison site despite it showing them as being around £450ish. Apparently Birmingham is now classed as a city was the excuse for the high quote. So forget about postcodes if you live anywhere in Birmingham as it's a city!!

RIAS quoted £340 on better terms than the other two so I went with them. All of these had one thing in common the insurer was Fortis so someone somewhere is making a tidy profit.

Considering car insurance is a legal requirement it is disgusting how these responsible outfits are finding extra ways of screwing the responsible drivers in order to cover the losses created by those who don't bother with insurance or so we are told. Makes me wonder why I bother as well because come next year my car will probably be worth no more than some of the excesses!!

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I suppose it is the bad habits of the Banks spreading into the Insurance Industry, Many of the Insurance Companies are owned by the big banks, of course, so perhaps it is not surprising. My biggest beef about them is when they come up with an extortionate renewal price, which automatically happens unless I stop it, and will amazingly plummet when it is pointed out that Companies from the same Bank group are offering much cheaper policies on the comparison sites. They will always negotiate a price, apart from Yes apparently. Point noted!

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No wonder this country is known as Rip Off Britain ! Just about every sector of the financial and banking sectors have been taking us for a ride for years !

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The last time I incurred charges from a bank was when I paid my credit card a couple of days late. Happily it was refunded when I complained. The issue however is that even after all the fuss banks etc are allowed to charge these fees irrespective of the work done by the organisation. Even the reduced current £12 fee for late payment on my credit card is a rip of since the only work done by the company is the line (computer generated) on my bill adding the extra fee. Spread over all the customers and all the monthly bills the cost of doing this cannot be more than a tiny fraction of a penny each time.

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Suggestion, as appeared from somebody else in theses columns, and which I have been doing for years, after the second letter, and I say it clearly in the second letter if no advance, I will be charging at my hourly rate for further letters and time spent.

That person got money for that waste of time, for failing to do what they should have done originally.

As they are allowed to change their terms if they write to you about it, you are imposing new terms, after all, your time is worth something, and is just like their time.

Good one Portie!

Lorna, as you wrote to them telling them not to charge via your card, they are guilty of fraud by making a false declaration, obtaining a pecuniary advantage, because part of the terms of use are that they had authority to charge, which they didn't, and you are able to claim for your time, from the start, and that includes the cost of call so 0845/075 numbers. They have a deal with the telecom company for a share of the cost of the call. I stipulate if I have to call such numbers at any time, £1 per minute. Always do in writing.

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I was ripped off by well know bike insurance company. Bike written off by an MOT tester so cancelling the insurance cost me £50 including a threatening paragraph that if I did not comply a debt collection agency would be on my tail. I should have kept quiet until expiry and saved £50!

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I totally agree with you Daniel. The fees charged by banks seem to be totally disproportional to the work they have to do and spreading the cost over their clientele the cost must be negligible. How can they justify a the fees they charge to clients just to send them a letter as clearly they are computer generated and generic. Seems like some invisible manager just picks an arbitrary figure which they have managed to get away with for years. As I have already said the banks have taken the public for a ride for decades when the markets/economy were up and now they are done they are stifling recovery by not lending to medium sized companies and start ups who are the ones who are going to get us out of this mess ! I totally agree what Vince Cable has recently said about the type of people who work in that industry having worked in the City for years albeit not in banking !

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It would be highly progressive if there was a Citizens Charter allowing customers of banks and insurance companies and other financial entitities to charge them a fee for the time wasted and stressed caused by their errors and oversights. Why should they have the only rights to charge a fee for non-payment etc.

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NFK... If you have a thatched property they won't even insure it !

also...

auto Debits from credit cards should be outlawed.

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All of our regulation QUANGO's are useless.......maybe Citywire should forward these forums to the Government.

The previous lot said they would reduce, but never did, and as a consumer and taxpayer, I would prefer better regulation but this isn't possible then why pay a fortune for something that is obvously ineffective............

reminds what happened about the initiative to make all public service employees earning more than the Prime Minister justify their excessive salaries

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all-way's try your LOCAL BROKER as well as compare sites my brother saved around £2,000 going to a broker compare to all the compare websites

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NEVER! NEVER! give anyone a mandate to debit directly to your CREDIT Card because you can NEVER revoke it

Only the institution itself can revoke the mandate.

Clearly, this is insane ...But absolutely true.....

Ask your credit card issuer.

Theoretically the mandated company can keep taking money from you for as long as they wish.

Even cutting up your card and cancelling your account will not save you from further direct debits for which you will be liable.

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Be wary of Bluefin, they have deliberately chanelled as much of their insurance premium credit into one company called Premium Credit (often without clients fully understanding). This credit arrangement gives any credit rate over around 2.45% straight to Bluefin (so on 6.35% a whopping 3.9% is Bluefin's). Then when there are changes or defaults there are more charges - typically £35 on the credit as well as the insurance and their fee - so you could get hit for 2x£35 in addition to the insurers charges. I suspect some of these charges and some higher up 'overrider' goes to Bluefin too. If you are with Bluefin and your credit provider changed in the last two years check the rates, charges, and ask Bluefin why the change was made. If your credit was with the insurer then it is likely they hid the renewal of that credit plan from you. Unless they can show your written records of your informed consent they are in big trouble. But why would you pay more for credit? Ask for your money back on the credit and complain! If you are still not happy contact the FSA.

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Anonymous 2 needed this 'off the record'

Nov 24, 2010 at 19:48

In addition to the above Bluefin are also moving clients to policies offering much higher levels of commission and the policy is not always at the same level of cover than the one they move you from.

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