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Motorists stung by huge surge in insurance stealth charges as admin fees increase by twice the rate of inflation since 2012

This Is Money logo This Is Money 5 days ago Grace Gausden For This Is Money
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Drivers have seen huge increases in car insurance administration fees since 2012 with charges accelerating by twice the rate of inflation, new research shows.

Cancellation fees have risen 49 per cent since 2012 while charges for mid-term policy alterations have also increased 38 per cent, according to data from GoCompare.

On top of the rising cost of annual premiums, most policies now include an adjustment fee, which is payable when an amendment is made to a policy as well as a cancellation charge.

Motorists could also expect to pay set up fees and charges for duplicate documents, although these are less common the comparison website says. 

Lee Griffin, founder and chief executive 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.'

He adds: '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.' 

GoCompare compared the administration fees applicable on comprehensive car insurance policies in June 2012 with those in June 2019.

Gallery: Top 10 ways to save money on car insurance (Auto Car)

a car parked on the side of a road: However, this is the first decrease since 2014, and premiums are still far higher than they were a couple of years ago. High insurance prices have been driven by a number of factors, including the doubling of Insurance Premium Tax from 6% to 12% in the past two years. The good news is that more of us are shopping around for car insurance, encouraged by changes introduced by the Financial Conduct Authority in April 2017. These aimed to boost consumer engagement at policy renewal time and included a requirement to show the previous year’s premium on renewal notices. So, if you’ve just got the dreaded renewal notice and your premium next year is looking more like a Premier League footballer’s pay cheque than the fee to insure a Volkswagen Golf, here are some steps you can take to get good cover for less - all quotes provided by Admiral Insurance:

It analysed 232 comprehensive motor insurance policies on the 3 June 2012 to 364 comprehensive motor insurance policies on the 3 June 2019, from independent financial researcher Defaqto.

Percentages are rounded up to the nearest whole number and average fees are based on policies which charge a fee.

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 per cent.

Motorists now face being charged up to a massive £70.50 for changing their details, depending on their policy. This fee is payable in addition to any increase in premium caused by the change.

Around a fifth of policies will allow drivers to amend their policy online – some free of charge. However, if this change is made through a call centre, a charge will be made.

Drivers must advise their insurer of charges in their circumstances or to the insured vehicle as this may affect their risk and failure to do so could invalidate their cover.

NUMBER AND COST OF ADJUSTMENTS FEES   
Year 20122019
% of policies charging fee67%73%
Range of fees depending on policy£10 to £50£7.50 to £70.50
Average fee£20.51£28.25
Source: Compare the Market 

Cancellation charges – up 49% 

Cancellation charges have increased 49 per cent since 2012, with the average charge now standing at £60.85.

Motorists are able to cancel their car insurance at any time during their policy if they no longer need it or wish to change provider. 

Insurers are legally required to give a 14-day 'cooling-off' period which means that policyholders who want to end a policy within the first two weeks will be eligible for a refund.

© Getty

Despite this, an admin fee may still be added on and drivers will be charged for the numbers 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.

NUMBER AND COST OF CANCELLATION FEES    
Year 20122019
% of policies charging fee74%79%
Range of fees depending on policy£10 to £150£7.50 to £300
Average fee£40.95£60.85
Source: Compare the Market 

Set-up fees – up 82%

Although set-up fees were once relatively rare, the number of policies under which set-up fees (which cover the cost of arranging the policy) are payable has jumped from 12 per cent in 2012 to 38 per cent in 2019.

The average cost is £37.63 but these fees can cost up to £150, depending on the policy.  

NUMBER AND COST OF SET-UP FEES    
Year20122019
% of policies charging fee12%38%
Range of fees depending on policy£5 to £52£10 to £150
Average fee£20.66£37.63
Source: Compare the Market 

Duplicate documents fees – down 25% 

Duplicate documents fees are one of the only charges that have reduced since 2012 – dropping by 25 per cent. 

This decrease is most likely linked to the rise of digital documents in recent years, making it easier and cheaper for motorists to receive copies. 

NUMBER AND COST OF DUPLICATE DOCUMENTS FEES    
Year20122019
% of policies charging fee43%35%
Range of fees depending on policy£5 to £40£5 to £39.77
Average fee£18.58£13.85
Source: Compare the Market 

Griffin added: '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.

'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.'

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