Insurance Rip-Offs

[Jack911]

I changed cars recently but couldn't get rid of the old one before I bought the new one.

I wanted to use my current NCB on the new car so I ended up taking out a policy which I knew I'd have to cash in after having it just a month or two.

I used one of those search engines to find the cheapest one and today I rang up to cancel it. I'd only had it from 15 January until 7 March so I was expecting to get most of my money back. Yeah, right.

The lady told me that I had used only £102 of the total policy cost, but there would be a "short-term" rate which would be used instead. Also, there was a cancellation charge of £75.

So out of a policy which cost a total of £734 I was charged £442 for less than two months of cover. Another way to look at it is that they charged £340 to cancel it early. Easy money if you can get it.

I've cancelled policys with other, more reputable firms, in the past and received a straight pro-rata refund.

I'm not sure if I can name this company here, but the name rhymes with "Fudge-It" and their logo is "Smart People".

The moral of this story? Read the fine print and avoid these scumbag companies.

[Jimmyarm]

You entered into a 12 month contract and are complaining because you are penalised for choosing to end it early ?

[Jack911]

Wow, you don't miss a trick do you?

So you don't think that the "fees" involved are a little on the crazy side of excessive?

[Jimmyarm]

Not really, they are a business not a charity

The broker has to take an amount to cover their costs in setting up/cancelling the Policy as does the Insurance company.

As you knew you were going to cancel it 'early' did you not think to look at the early cancellation charges to start with ?

[CampDavid]

Brokers are like this.

Always best to check first, especially if you're planning on canceling

[GKP]

Hasn't this been the norm ever since car insurance was invented?

[Jack911]

To Jimmyarm:

I think that's rubbish.

For a start, broker costs are built into the premium as almost everyone knows.

These people are just on-sellers who assume no risk. The actual underwriter no doubt just refunds the unused portion of the cover (as happend to me when cancelling a previous policy with another insuance firm) and the scumbag company pockets the difference in profit.

No, I didn't think to look at the cancellation penalties. Hence the post to warn other people.

[geeteeaye]

Jimmyarm said:

As you knew you were going to cancel it 'early' did you not think to look at the early cancellation charges to start with ?

This is the main point, daft to just blindly go for the cheapest quote without taking into account the cancellation charges and amount that would be refunded. Also it probably would have been wiser to pay monthly, at least then they'd have to chase you for the money while you argued the toss.

[EK993]

Why didn't you read the terms and conditions of the contract before entering into it, especially as you knew you would be cancelling it shortly after taking it out? Would seem like a common sense thing to do.

[mercGLowner]

No doubt R1 Loon will be along very soon to impart his infinite wisdom on insurance matters - get your crash helmet on OP

[AndyLB]

Should be a reasonable admin fee imho, plus the cost of insurance pro rata for the time you've had it. This is ridiculous

[tim2100]

Sorry can't see a problem.

It is 12 months insurance. You cancelled part way through. They have paid the broker, the IPT etc etc. These will be the complete amount. Not pro-rata.

Did you expect a full pro-rate refund?

[Jack911]

tim2100 said:

Did you expect a full pro-rate refund?

No, but I didn't expect to be ripped the way I was.

Like I've said before in this thread, I've cancelled other policies and YES, I did receive a full pro-rata refund.

[EK993]

AndyLB said:

Should be a reasonable admin fee imho, plus the cost of insurance pro rata for the time you've had it. This is ridiculous

The cancellation terms will be in the contract - its pretty black and white to be honest. If that's what the contract states in terms of cancellation charges, and the OP entered into the contract its got nothing to do with "should be.." and what you "feel is fair".

[Jack911]

AndyLB said:

Should be a reasonable admin fee imho, plus the cost of insurance pro rata for the time you've had it. This is ridiculous

Finally, someone with some common sense.

I guess the rest of you work for insurance companies.

[tim2100]

Jack911 said:

No, but I didn't expect to be ripped the way I was.

Like I've said before in this thread, I've cancelled other policies and YES, I did receive a full pro-rata refund.

Reading it again. if you only planned to keep the Policy for a matter of month until you sold the car, why didn't you take out short-term insurance?

[Jack911]

EK993 said:

The cancellation terms will be in the contract - its pretty black and white to be honest. If that's what the contract states in terms of cancellation charges, and the OP entered into the contract its got nothing to do with "should be.." and what you "feel is fair".

Agreed, sort of.

The purpose of this thread is to raise awareness of what some of these terms are and why you should exercise the caution which I quite clearly did not.

What "should be" and "what's fair" are still relevant issues.

[Jack911]

tim2100 said:

Reading it again. if you only planned to keep the Policy for a matter of month until you sold the car, why didn't you take out short-term insurance?

I was never really sure whether I'd sell or not.

I was happy to keep the car if I couldn't achieve what I wanted for it.

[Noger]

Jack911 said:

Like I've said before in this thread, I've cancelled other policies and YES, I did receive a full pro-rata refund.

Either you were in year two+, having renewed, in which case many insurers will offer pro-rated, or you cancelled because you changed cars and they would not insure the new one. Otherwise you don't often get full pro-rata without admin fee.

Admin costs are all up front in setting the policy up, so short rates are fairly common, and entirely legal (you have no "right" to cancel beyond the 14 days cooling off) but should not be punitive according to ICOBS 7.

However, yours seems somewhat high. £75 is a bit steep (2 or 3 times a direct insurer), and the short rate is a bit eyewatering - 50% short rate for 2 months is very harsh.

I do disagree with the majority (unusually maybe for an insurance bod to be taking the other side) here. Offering a consumer a cancellation option, and then penalising them for taking it isn't fair.

I think you would have a pretty good chance of a complaint succeeding. Initially ask them to justify their charges based upon their reasonable costs incurred, then proceed to the Ombudsman if that fails.

[Motorrad]

NFU don't charge any cancellation fee, admin fee and pro-rate refunds. One of the reason I use them because even though their headline rate looks more expensive it is in fact much cheaper (for me at least). Surely we all read the small print before purchasing?