New research shows car insurance providers are giving motorists a raw deal.
Car insurance providers are levying ‘eye-watering fees’ on drivers for tasks as simple as renewing cover, cancelling a policy, changing minor details, choosing to pay monthly or sending out duplicate documents.
That’s according to new research from consumer group Which? as part of its 'Stop Sneaky Fees and Charges' campaign.
Which? took a look at 44 insurers and compared the various types of administration fees they charged motorists. It found that while many were acting fairly, others were charging sky-high fees that didn’t seem to reflect the actual cost to the firm.
Fees for setting up cover
Which? found four insurers charge set-up and renewal fees just for arranging cover. 1st Central was particularly cheeky - charging £50 for both, while Hastings Direct charged £20 for renewal.
If you want to spread the cost of your policy and pay it off monthly, it is most expensive with Kwik-Fit. It charges a £35 fee plus a variable interest rate. During the Which? investigation the firm offered a whopping APR of 64.4% compared to a typical 22.6% APR.
Fees for simple tasks
Which? says that of the 44 insurers it looked into, 39 charged an adjustment fee for changing details like your job title or address. The worst offender was IGO4 Insurance which charged £35, more than £10 over the average £22.70.
Sending a replacement insurance certificate or copy of the policy document typically cost £14.18, but AXA and Swift Cover were found to charge more than double for the privilege at £30.
Fees for cancelling cover
Alarmingly two thirds of insurers (30) were found to charge a fee for cancelling during the 14-day cooling-off period, with the highest charges coming from IGO4 (£65) and LV= (£40).
The average cost of ordinary cancellation fees among insurers was £49.95, but Budget, Endsleigh and IGO4 all charge £75.
The worst insurers for fees
Here are the ten worst providers according to Which? based on the administration fees they charge.
|
Provider |
Pay monthly APR |
Set up fee/renewal fee |
Adjustment fee |
Duplicate documents fee |
Cooling-off period cancellation fee/cancellation fee within first year |
|
IGO4 Insurance |
Variable |
£0/£0 |
£0 to £35 (a) |
£15 |
£75/£75 |
|
Kwik Fit Insurance Services |
Variable (b) |
£0/£0 |
£30 |
£15 |
£30/£50 |
|
1st Central |
Variable |
£0/£50 |
£20 to £30 (c) |
£0 |
£0/£50 |
|
AXA Direct |
Variable |
£0/£0 |
£0 to £30 (d) |
£30 |
£25/£52.50 |
|
Hastings Direct |
Variable |
£20 to £32.50 (e)/£20 |
£0 to £25 (d) |
£5 (f) |
£0/£45 |
|
Swiftcover |
Variable |
£0/£0 |
£0 to £30 (d) |
£30 |
£25/£52.50 |
|
Endsleigh |
39.7% |
£0/£0 |
£25 |
£25 |
£25/£75 |
|
Zurich |
33% |
£0/£0 |
£25 |
£25 |
£25/£50 |
|
Esure |
25.4% |
£0/£0 |
£26 |
£26 |
£26/£55 (g) |
|
Sheila’s Wheels |
25.4% |
£0/£0 |
£26 |
£26 |
£26/£55 (g) |
Source: Which?
(a) Some changes can be made online for free
(b) Charges a fixed £35 fee to arrange credit for customers
(c) £20 fee to amend online and £30 fee to amend over the phone
(d) Can amend policy online for free
(e) £20 ti set up online £32.50 over the phone
(f) No charge within the first six weeks
(g) Cancellation is £27.50 after first year of policy
The best insurers for fees
Insurers weren’t all bad, though. Here are the top ten providers according to Which? based on their policy on charging administration fees.
|
Provider |
Pay monthly APR |
Set up fee/renewal fee |
Adjustment fee |
Duplicate documents fee |
Cooling-off period cancellation fee/ordinary cancellation fee within first year |
|
Age UK |
0% |
£0/£0 |
£0 |
£0 |
£0/£0 |
|
NFU Mutual |
2.75% |
£0/£0 |
£0 |
£0 |
£0/£0 |
|
Volvo Car Insurance |
19.83% |
£0/£0 |
£0 |
£0 |
£0/£0 |
|
Volkswagen Insurance |
25.98% |
£0/£0 |
£20 |
£2.50 |
£15/£0 |
|
Direct Line |
Variable |
£0/£0 |
£0 |
£0 |
£0/£47.70 |
|
Mercedes-Benz Insurance |
18.5% |
£0/£0 |
£0 |
£0 |
£0/£50 |
|
John Lewis Insurance |
23.5% |
£0/£0 |
£0 to £15 (a) |
£0 |
£0/£40 |
|
Rias |
24% |
£0/£0 |
£0 to £25 (a) |
£0 |
£15/£35 |
|
Sainsbury’s bank |
Variable |
£0/£0 |
£24.38 |
£9.54 |
£0/£48.76 |
|
Toyota Insurance |
28.5% |
£0/£0 |
£12 |
£10 |
£0/£35 |
Source: Which?
(a) Can amend policy online for free
Ending sneaky fees
[SPOTLIGHT]Which? is calling for any fees associated with setting up, amending or duplicating any type of insurance policy to be reasonable and at no more than the cost to the company.
It also wants companies to set out all fees and charges clearly to allow motorists to be able to easily compare providers.
Which? executive director Richard Lloyd said: "We’ve found some insurers charging customers eye-watering admin fees that can be hard to avoid, and people often don’t know what they are actually paying for. We want companies to ensure their fees reflect actual costs and aren’t just a way to squeeze more money from customers."
How to avoid charges
There are a few things you can do to avoid sneaky admin charges.
For example instead of spreading the cost of an insurance policy with your provider, you can avoid the fees by doing it with a 0% purchase credit card. Read The best 0% purchase credit cards for more. Or even better, pay it all off in one go.
You should also try to make changes to your policy online rather than calling up, as most companies allow you to do this for free. And don’t forget to haggle. You may be able to avoid renewal fees and duplicate document fees if you negotiate with your provider.
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