Save, make, understand money


The extra fees driving up the cost of your car insurance

Paloma Kubiak
Written By:
Paloma Kubiak

Millions of UK motorists could be paying more for car insurance than they initially thought as a majority of products charge extra fees.

An overwhelming majority (97%) of 321 insurance products analysed included at least one extra fee which drivers may not be aware of.

Just nine out of 321 did not charge any extra fees, according to analysis of Defaqto data by NFU Mutual.

It found that half of the products charged customers for cancelling a policy during the 14-day, legally required, cooling-off period. The average cost to cancel was £41 but the highest charge was a staggering £400 once broker fees and blackbox costs were included.

Nine in 10 charged a fee for cancellation, hitting drivers with an average £57 fee, while the most common fee (95%) related to paying by direct debit.

Here, drivers are charged higher premiums for spreading payments throughout the year rather than paying upfront for the year.

Meanwhile, over 40% of insurance products “penalised customers” with set-up and renewal fees, averaging £58 and £47 respectively. Three quarters (74%) included a fee for adjusting a policy and charged an average of £39 for the privilege.

The analysis comes as the average price of car insurance in the three months to June surged to a record high, owing to the hefty rise in vehicle repair costs, according to the Association of British Insurers (ABI).

‘Extra fees make budgeting more difficult’

NFU Mutual said with so many car insurance products charging for common things, customers could find themselves “on the hook” for substantial costs on top of their insurance premiums.

Wendy Yeomans, car insurance expert at NFU Mutual, added: “With the cost-of-living crisis hitting all our pockets, it’s more important than ever to keep on top of our budgets.

“Many households have cancelled media subscriptions or altered their buying habits to keep spending under control, but many will not be aware they are paying the equivalent of this in extra fees for their car insurance.

“Extra fees like this, which many consumers aren’t aware of, make budgeting more difficult and effectively mean the prices many pay for their car insurance creep up beyond what they expected.”

The table below lists the 312 insurance products charging a fee of some kind: