We had to get rid of the Disco the other week due to extensive rot on the rear chassis.

Without knowing when we might be able to afford a replacement vehicle, the decision was taken to cancel the insurance - a full year policy, paid for monthly.

It was understood there would be some osrt of admin fee connected with this, but it seemed the more prudent option than paying out for something we didn't have, for the foreseeable future.

 

When the confirmation of the cancellation came through, the breakdown was as follows:

Premiums paid to date - (4 months) £106 and some pennies

Charges for insurance over the period of cover  - £161 and some pennies

NCB Discount £9

Direct arrangement Fee - £30

Cancellation Fee - £50

 

Total due for payment £133.

 

I queried why the charges where so high that we had pay  an additional £133 and was told flatly that these charges were all documented in the contract  accepted when we took out the policy.  When asked whereabouts it was detailed I were told it was a very clear table of charges under the section regarding cancellations.

The section for cancellations in the contract paperwork was indeed a table - showing the pro-rate of premiums refunded if the policy was cancelled at various terms.  Pointing this out, firmly, to the rep didn't go well, as they repeatedly talked over me about "you've accepted the contract and that's what we're allowed to charge."

 

A change of approach asking if they (the company) felt this was an appropriate charge on top of the paid premiums got the reply "I can't offer financial advice. We don't get 13% of the premium you pay because you pay monthly" - all completely irrelevant as I don't believe I was asking for financial advice, and the business arrangements they have with the credit supplier is not relevant to the contract held with them as the cover provider - the premium is already loaded when you opt to pay monthly, ostensibly for the "costs" so the broker isn't "out of pocket" as the rep was trying to suggest.  A simple and clear request for a breakdown of the costs that make up the two administrative fees totalling £80 was met with the reading of the script "you accepted the costs and charges when you signed the contract and those are the fees we are allowed to charge."

 

 

At this point, I could feel my patience wearing thin (and probably the rep did too, to be fair), so while things were still calm, I requested a call from their CS department, as we were now in dispute over the charges.  The rep on the end of the phone adopted quite a sneering tone as they curtly informed us that it would take five days to hear from the customer service team and they would hold onto any proof of no claims until we'd paid them the £133 regardless, so would find it very difficult to get insurance as this dispute would be shared with other insurers.  

At the point where we cancelled, their right to any no claims discount was being revoked (my understanding of contract law is shaky at best)  but it appears the insurance business is so one sided in favour of the provider/broker it's unreal. Or maybe it's this one provider/broker?

 

Calling them back the next morning (as no chance I was going to wait with this hanging over us), the CS rep looked over the notes from the night before and immediately said "oh, you've been charged short term rates when it would have been pro-rata as you pay monthly.  The correct figure you own is £30."

 

Massive difference, and far more palatable.  Balance duly settled.

 

But I do wonder, how many people just accept whatever charges are levelled (for cancellation, for an small change, for renewal, whatever) as a service fee without querying the breakdown and asking to see how those calculations for loss etc have been arrived at - as actual costs/losses are wildly different from what they are allowed to charge (sic 'get away with') 

 

Moral: 

Always query charges - it might not be right/correct.  Nice little earner though if the majority just swallow it.

 

Which company was it?

I just paid £180 to cancel the car policy and £120 to cancel a bike policy, wonder if I was shafted. 

Which company was it?

Sureterm Direct....but seems to also trade as Lancaster Insurance Services.

I just paid £180 to cancel the car policy and £120 to cancel a bike policy, wonder if I was shafted. 

I wonder that too.......Seems exceptionally high.

When you pay monthly, you are in effect paying for a loan. The insurance company pays the underwriter for the full 12 months up front and then you pay back the broker at the agreed rate (with interest added). You think you are paying monthly, but you are not as its a 12 month policy on which you are paying finance. In the first 6 months or so it will always cost more to cancel the policy than it would towards the end (same as with a bank loan for example) due to compound interest

 

I always pay for the full whack up front, that way if you cancel there is only the admin fee to pay, and you get a pro rata refund. I've just done it when I cancelled the insurance on my late fathers car now we have sold the car.

£200 annual premium, run for 6 months

£47 cancellation fee, and a £51 refund heading my way.

When you pay monthly, you are in effect paying for a loan. The insurance company pays the underwriter for the full 12 months up front and then you pay back the broker at the agreed rate (with interest added). You think you are paying monthly, but you are not as its a 12 month policy on which you are paying finance. In the first 6 months or so it will always cost more to cancel the policy than it would towards the end (same as with a bank loan for example) due to compound interest

 

I always pay for the full whack up front, that way if you cancel there is only the admin fee to pay, and you get a pro rata refund. I've just done it when I cancelled the insurance on my late fathers car now we have sold the car.

£200 annual premium, run for 6 months

£47 cancellation fee, and a £51 refund heading my way.

...and, you may not even need to pay an admin. fee. When we went from two cars to one (both insured with More Than, both paid up-front), I rang to cancel one of the policies and said "I hope that you won't be hitting me with an admin fee for this....otherwise I'll be moving my other car elsewhere". Reply..."No, sir, we wouldn't do that to you". And they didn't - I got a pro-rata refund the same day. (I have since moved to John Lewis Insurance because they offered a lower premium than More Than). The cover (which is somewhat better) is provided by....yes, More Than!

I work in the industry and I'm inclined to agree with you in regards to the unreasonable extent of the charges, however it is frustrating how a significant proportion of drivers incept policies without familiarising themselves with the basic terms.  Whilst I would not expect the average individual to analyse their policy documents, cancellation fees and scope of coverage should be a consideration when purchasing cover and indeed if, at inception you had an inkling you may be cancelling early, it would have been prudent to clarify the cancellation charges.

 

Despite the public perception of motor insurance, the insurance market is not especially profitable from underwriting profit alone, therefore brokers and insurers alike do look to capitalise on finance for monthly instalments and mid-term charges to maximise their margins.  Brokers (as opposed to direct insurers e.g.: Admiral; Direct Line etc.) tend in my experience to apply higher charges for this type of activity, which I might cynically suggest is a result of their businesses being squeezed by the rise of the price comparison site.

 

You were right to query the charges - the regulators are somewhat woolly about what insurers can charge in these circumstances.  It is, as you suggested to the rep, about what is "reasonable".  Of course, challenging this type of request will sometimes pay off as it is not financially viable to handle complaints and escalations for the sake of what is a relatively small amount of money (admittedly, not necessarily to the policyholder!).  That said, if it was plain unreasonable of the customer to complain, the insurer may stick to their guns to set a precedent.

 

Moral of the story: read your policy documents and understand the legal contract you are entering before signing (paying the premium).