Insurance Policy Change Fees Excessive

According to research conducted by Which? magazine, motorists are being charged excessive fees for minor alterations and renewals for policies. The consumer watchdog has also found the same among homeowners. The fees include up to £30 for minor amendments like: updating personal details, transferring vehicles or changing an address. The group also found that fees become excessive for simply renewing policies or cancelling them.

Its research looked into the terms and conditions on websites for 39 vehicle insurers and 34 home insurers. It found that both Swiftcover and Axa charge policyholders £30 to alter the vehicle covered, update their surname in case of a marriage or alter their address. At Hastings, customers are charged £35, while renewing a policy costs £5. There is a £10 charge to renew 50plus Insurance policies and a flat £10 set-up fee. To cancel an insurance policy for a vehicle, Budget Insurance charges £75 per cancellation, while More Than, Zurich, Axa and Sheila’s Wheels charge at least £50.

High interest charges were also highlighted in the report, with these being attached to several policies when customers choose to pay by installments. Swiftcover, Axa and Budget Insurance charges between 29.3% and 32.3% in interest depending on the cover policy. However, First Direct and Age UK don’t charge extra for paying by the month. Additionally, most of these charges aren’t published on insurers’ websites, which makes it almost impossible for customers to make an informed decision or compare providers.

Which? has long been a critic of charges not being clear enough and easily accessible to consumers using the website of their insurer. Chief executive Peter Vicary-Smith says it’s disgraceful that insurers charge excessive fees to make minor alterations to a policy. These fees should reflect the actual cost of the changes to the company and shouldn’t be used to make easy money from customers who are struggling with soaring insurance premiums already. They want insurers to be more clear about charges they impose and stop hiding details on terms and conditions pages. The Financial Conduct Authority, the new regulator, needs to ensure these fees reflect the real cost incurred by insurers, he added.

Responding to the report, a spokesperson for Swiftcover said that Which? has it wrong when it comes to their website and what they are calling ‘hidden charges’. They have always been an online-only insurance provider that allows customers to change policies online when they want, as often as they need, without fees. However, if a policyholder chooses to update their policy by phoning the help desk, there’s an administration fee of £30 – similar to many other insurance providers. Additionally, the annual percentage rate for every customer is a calculation based on risk, so the flat rate Which? has indicated is just wrong.

An Association of British Insurers (ABI) spokesman says that paying for an insurance policy by installments reflects the increased financial risk to the insurance provider. This is because there’s evidence that suggests a customer who chooses not to pay in full upfront is more likely to file a claim. Insurers are dedicated to keeping administration costs down as much as they can, but where they do incur costs they are unable to absorb, these costs may have to be passed on to the consumer, he added.