Motorists hit by huge rise in car insurance stealth charges: Traffic

12 August 2019, 09:09

Motorists hit by huge rise in car insurance stealth charges

Analysis1 of car insurance policies reveals that since 2012 admin fees have become more commonplace, with charges increasing by twice the rate of inflation2

  • Cancellation fees have risen by 49% since 2012;
  • Charges for mid-term policy alterations have increased by 38%;
  • GoCompare Car Insurance urges drivers to dispute charges that they feel are unfair or disproportionately high.

New research reveals a dramatic increase in the cost of car insurance administration fees since 2012. 

On top of the rising cost of their annual premium, motorists are being charged significantly more by their insurer for administrative tasks.  Most policies now include an adjustment fee - payable when an amendment is made to a policy - and a cancellation charge.  Less common charges include set-up fees and charges for duplicate documents.

The research, undertaken by GoCompare Car Insurance, compared the administration fees applicable on comprehensive car insurance policies in June 2012, with those in June 2019. 

 Adjustment fees – up 38%

Since 2012, the cost of making a material change to a policy part-way through the year, such as changing name, address or occupation, or adding or removing a named driver, has risen by 38%.  Depending on the policy, motorists could now be charged up to £70.50 for updating their details.  This fee is payable in addition to any increase in premium caused by the alteration.   

Around a fifth of policies allow drivers to amend their own policy online, some free of charge.  However, a charge is made if the change is facilitated through a call centre.

Year >

2012

2019

% of policies charging fee

67%

73%

Range of fees depending on policy

£10 to £50

£7.50 to £70.50

Average fee

£20.51

£28.25

Policyholders are contractually obliged to advise their insurer of changes in their circumstances or to the insured vehicle – which may affect their risk.  Failure to do so could invalidate their cover.

Cancellation charges – up 49%

Motorists can cancel their insurance at any time during the term of the policy if they no longer need it.  Insurers are legally required to give a 14-day “cooling-off” period, this means that policyholders who want to end a policy within the first two weeks are eligible for a refund.  However, an administration fee may still be applicable, and motorists will be charged for the number of days for which they were covered.  Similarly, for policies cancelled after the cooling-off period, an admin fee may be payable in addition to the cost of the period for which the car was insured for.

Cancellation charges have increased by 49% since 2012, with the average charging now standing at £60.85.

Year

2012

2019

% of policies charging fee

74%

79%

Range of fees depending on policy

£10 to £150

£7.50 to £300

Average fee

£40.95

£60.85

Set-up fees – up 82%

While still a relatively rare fee, the number of polices under which policy set-up fees (to cover the cost of arranging the policy) are payable has shot up from 12% to 38% of policies in the last seven years.        

Year

2012

2019

% of policies charging fee

12%

38%

Range of fees depending on policy

£5 to £52

£10 to £150

Average fee

£20.66

£37.63

Duplicate documents fees – down 25%

Good news for motorists requiring duplicate policy documents – fewer policies have a fee, of those which do, fees have fallen by 25% since 2012.  This is most likely linked to the rise of digital documents in recent years.

Year

2012

2019

% of policies charging fee

43%

35%

Range of fees depending on policy

£5 to £40

£5 to £39.77

Average fee

£18.58

£13.85

Commenting on the research, Lee Griffin, founder and CEO of GoCompare, said: “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.  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.

“Insurers should be upfront about any admin fees they charge. 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.  Fees should also be proportionate to the cost of the company of undertaking the work.”  

Lee continued: “If you feel you’ve been charged a disproportionately high fee, challenge it. Explain to your insurer why you think you have been charged too much.  They may reduce or waive the fees, particularly if it means keeping you as a customer.  You might also have grounds for complaint if the fees weren’t declared before you took out the policy.

“If you’re insurer doesn’t deal with your complaint to your satisfaction, you can ask the Financial Ombudsman Service, which handles complaints between financial services companies and their customers, to review it.”  

For more information on admin charges, visit: https://www.gocompare.com/car-insurance/administrative-charges/

-Ends-

For further information please contact:

Anders Nilsson or Louisa Marsden at GoCompare on 01633 654 054 / 01633 655 132

Gordon, Jason or Liz at MAW Communications on 01603 505 845

Keep up-to-date with GoCompare on Twitter; @GoCompare

Notes to editors

1Defaqto Matrix of 232 comprehensive motor insurance policies (03 June 2012) and 364 comprehensive motor insurance policies (03 June 2019) - instant and unbiased market and competitor intelligence, from independent financial researcher Defaqto. Percentages are rounded up to the nearest whole number. Average fees are based on policies which charge a fee.

2Source: rate of inflation 2012 to 2017 is 17.1% based on Consumer Prices Index www.officialdata.org

GoCompare

GoCompare is a comparison website that enables people to compare the costs and features of a wide variety of insurance policies, financial products and energy tariffs.

GoCompare does not charge people to use its services, and it does not accept advertising or sponsored listings, so all product comparisons are unbiased. GoCompare makes its money through fees paid by the providers of products that appear on its various comparison services when a customer buys through the site.

GoCompare does not sell its customers’ data.

When it launched in 2006, it was the first comparison site to focus on displaying policy details rather than just listing prices, with the aim of helping people to make better-informed decisions when buying their insurance. GoCompare has remained dedicated to helping people choose the most appropriate products rather than just the cheapest, and has teamed up with Defaqto, the independent financial researcher, to integrate additional policy information into a number of its insurance comparison services. This allows people to compare up to an extra 30 features of cover.

GoCompare is the only comparison website to be invited to join the British Insurance Brokers’ Association (BIBA) and is authorised and regulated by the Financial Conduct Authority (FCA).

For more information visit www.gocompare.com and www.gocomparegroup.com

Contact Information

Louisa Marsden

louisa.marsden@gocompare.com