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Motorists hit by huge rise in car insurance stealth charges

Written by: Emma Lunn
Admin charges on car insurance policies have risen by twice the rate of inflation, according to Go Compare.

The price comparison site analysed car insurance policies and found that on top of the rising cost of their annual premium, motorists are now being charged significantly more by their insurer for administrative tasks than they were back in 2012.

Adjustment fees

Policyholders are contractually obliged to advise their insurer of changes in their circumstances, such as a change in address or occupation, or to the insured vehicle.

Failure to keep your insurer informer could invalidate your cover, but updating your details usually generates an adjustment fee. This kind of fee has risen by 38 per cent since 2012.

Depending on the policy, motorists could now be charged up to £70.50 for updating their details. This fee is payable in addition to any increase in premium caused by the alteration. However, about a fifth of policies allow drivers to amend their own policy online, some free of charge.

Cancellation fees

Motorists can cancel their insurance at any time during the term of the policy if they no longer need it. Insurers are legally required to give a 14-day “cooling-off” period, which means that policyholders who want to end a policy within the first two weeks are eligible for a refund.

However, an administration fee may still be applicable, and motorists will be charged for the number of days for which they were covered. Similarly, for policies cancelled after the cooling-off period, an admin fee may be payable in addition to the cost of the period for which the car was insured for.

Cancellation charges have increased by 49 per cent since 2012, with the average charge now standing at £60.85, compared to £40.95 in 2012.

Set-up fees

While still a relatively rare fee, the proportion of polices which charge a set-up or arrangement fee has shot up from 12 per cent to 38 per cent of policies in the past seven years. The average fee has risen from £20.66 to £37.63 in the same period.

Duplicate documents fees

The Go Compare research revealed some good news for motorists requiring duplicate policy documents. Fewer policies now charge a fee than seven years ago, and of those which do, fees have fallen by 25 per cent since 2012. This is most likely linked to the rise of digital documents in recent years.

The typical duplicate document fee now stands at £13.85 compared to £18.58 in 2012.

Challenging unfair admin fees

Lee Griffin, founder and CEO of GoCompare, said: “The car insurance market is highly competitive, so rather than incorporating the costs of certain admin tasks into the basic premium, some insurers make other charges. This helps keep premiums down by ensuring that only the policyholders who change or cancel their policy, for example, pay for the additional work required to administer their policy.

“Our analysis shows that since 2012, the cost of some admin jobs has soared. And, the enormous range in costs between policies for the same tasks is inexplicable. Take adjustment fees, for example, depending on the policy you could either pay £7.50 or £70.50 to make an amendment to a policy.

“Insurers should be upfront about any admin fees they charge. These should be clearly set-out in their terms and conditions, so drivers are aware of the full costs before signing-up to a policy. Fees should also be proportionate to the cost of the company of undertaking the work.”

Go Compare suggests that drivers who think they have been charged a disproportionately high admin fee should challenge it.

To do so, explain to your insurer why you think you have been charged too much. It may reduce or waive the fees, particularly if it means keeping you as a customer. You might also have grounds for complaint if the fees weren’t declared before you took out the policy.

“If you’re insurer doesn’t deal with your complaint to your satisfaction, you can ask the Financial Ombudsman Service, which handles complaints between financial services companies and their customers, to review it,” says Griffin.

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