9 January 2018
Don’t get stung by your insurance
I’ve recently moved flat, and as a result I had to cancel my previous contents insurance eight months into the policy. By doing this, I was hit with a £35 fee for cancelling.
This was a bit of a kick in the teeth, considering the policy was for a place I no longer lived at. The insurer already received the full annual premium for the policy, so why does it need yet more cash when I cancel?
I decided to look into the vast amounts of data collected by Fairer Finance to get a better idea of what’s going on here. What I found was ‘surprising’, to say the least.
Beware the hidden fee
Our research shows that there is a serious problem with insurance fees. They vary wildly in amount - and can be completely hidden until you’re bought the policy.
Fees can be charged for anything, from simply setting up the policy to telling the insurer you’ve changed your name. Debenhams, for example, charges £50 to amend your car insurance policy. But many insurers, like NFU Mutual, don’t charge anything at all.
On average, making a change to your car insurance policy will set you back £23, even if it makes no material difference to the policy itself.
Can’t get away
On top of this, you’ll usually be looking at a £50 fee just to cancel your car insurance policy, but again this can vary. CSIS charges nothing for cancellation, while BoxyMo.co.uk charges £100. BoxyMo is a an insurer that installs a black box in your car – so when you end your policy it needs to send someone out to reclaim the box. But £100 seems over the top. For home insurance, the charge for cancelling is on average £24, but this can be as much as £75.
The FCA handbook states that the amount customers pay at cancellation should be made up of “any sums that a firm has reasonably incurred in concluding the contract, but should not include any element of profit”.
With this in mind, can providers really justify charging up to £100 to cancel? Especially when many providers charge a lot less, or nothing at all?
What makes this worse is that it can at times be impossible to find out what these fees are before purchase.
Our analysis shows 69% of car insurers that we rate in our customer experience ratings in our rankings that charge fees don’t state them clearly on the webpage during the purchase process. And over half (51%) don’t even itemise them in the policy document – the handbook designed to contain all information you’ll need about your policy.
It’s the same story when looking at home insurers. Of the home insurers that we rate in our customer experience tables, 59% don’t state them in the online purchase journey, and the 54% don’t itemise them in the policy document.
We’ve spent many long days contacting insurers directly to find out what fees they’re charging when there’s no information online. There’s been instances of customer support not knowing the amounts, or even stating amounts that contradict what’s in their documents.
The only sure-fire way of knowing what you’ll be charged is by looking in your schedule. This is a document which, in the words of Sainsbury Bank’s online customer support, “is only issued to customers after they have set up a policy”.
This may sound crazy – not being allowed to know key features of what you’re buying before you’ve bought it – but for many insurers it’s standard practice.
The FCA handbook states that the provider cannot charge a fee “unless it can prove that the consumer was duly informed about the amount payable”.
If we at Fairer Finance struggle to find the fees – and finding them is our job – then how can insurers claim to have ‘duly informed’ the customer?
What can you do?
Until insurers start playing by the rules, the only thing to do is check. Scour all links in the purchase process, and keep a look out for documents named things like ‘Terms of Business’ – often the fees will be hiding in there.
If an insurer states that it ‘may charge a fee’ without saying clearly what it is, then avoid the policy. You never want to be in the position of having to cough up £100 out of the blue – and if these insurers were avoided they might start playing fair.
Another tip is to purchase and manage your policy online. Some providers’ fees only apply if you do your business via their call centres. For example, More Than charges £25 to change your details via their call centre, but nothing if this is done online.
Finally, use our ratings to see which providers treat their customers fairly. Insurers that clearly tell the customer about all fees, or simply don’t charge them, do well in our transparency analysis – and tend to have happier customers as well.