In the last seven years cancellations fees have risen 49 per cent, while the cost of altering your policy has also increased 38 per cent, according to data collected from GoCompare. With the car insurance market so competitive companies have looked to exploit other opportunities to make more money, rather than raise the basic premium, with many deciding to increase the costs of their admin fees. Motorists who now take out a policy are likely to see it include an adjustment fee, which is payable when the details of a policy are amended, as well as facing a cancellation charge if they decide to end their policy early. Some drivers can also expect to pay set-up fees and can even be charged if they request duplicate documents of their policy, although it is understood these are not yet common practices.
GoCompare reviewed administration fees applicable on comprehensive car insurance policies for seven years from June 2012 with those in June 2019.
And Lee Griffin, founder and chief executive of GoCompare, finds it hard to explain why companies are vastly increasing their costs for carrying out the same administrative task.
“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,” Griffin said.
“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.”
The research found that the cost of administrative work from car insurance companies has increased in several areas.
Some polices charge drivers a whopping £70.50 for changing their details.
However, around one-in-five policies will allow drivers to amend their details for free, if it is done yourself online.
But a charge is likely to still be applied if the policy holder requests their details to be changed over the phone.
The average charge for cancelling a policy costs £60.85, after prices have increased by 49 per cent since 2012.
Drivers are able to cancel their car insurance at any time if they are looking to change provider or they no longer need to have cover.
And if taking out a new policy insurers will give you a 14-day cooling-off period, which allows policyholders the opportunity to end the policy during this period and be eligible for a full refund.
However, some car insurance policies will still look to charge an administrative fee for the number of day the vehicle was covered.
The use of and cost of set-up fees have seen a dramatic increase in recent years.
In 2012 only 12 per cent of polices had such a charge, but that has risen to 38 per cent by 2019.
Set-up fees could be as low as £5 seven years ago, with the average being £20.66, however, this can now be as high as £150, with average fees in 2019 being £37.63.
And Griffin is unhappy that companies offering car insurance are not transparent enough about the current admin costs of a policy.
“Insurers should be upfront about any admin fees they charge,” he added.
“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.”
GoCompare analysed 232 comprehensive motor insurance policies on the 3 June 2012 to 364 comprehensive motor insurance policies on the 3 June 2019, from independent financial researcher Defaqto.
Percentages are rounded up to the nearest whole number and average fees are based on policies which charge a fee.
Published at Wed, 14 Aug 2019 09:52:00 +0000