Exposed: ‘Hidden’ insurance charges

A Which? investigation has found that some home and car insurers appear to be taking consumers for a ride with exorbitant ‘hidden’ fees for basic policy changes and renewals.

We reviewed the terms and conditions on the websites of 39 car insurers and 34 home insurers and found there are often costly fees to make straightforward changes to policies. Axa and Swiftcover charge a flat fee of £30 to simply update your address details or change your vehicle, online changes with Axa and Swiftcover are free*.

Some insurance companies were also found to charge people a fee for renewing their policies. 50plus Insurance Services and Hastings hit consumers with a renewal fee of £10 and £5 respectively, and both also charge a £10 setup fee (though setup is free online with Hastings). Cancelling can also be costly, with Budget Insurance charging as much as £75 just to cancel a car insurance policy.

We also found that a number of insurers charge what we consider excessive amounts of interest to people who want to pay in instalments rather than paying for their cover upfront. Budget Insurance, Axa and Swiftcover all charged between 29.3% and 32.3% interest depending on the policy. This contrasts with Age UK and First Direct who charge nothing extra for their monthly payment options.

Many insurers don’t even publish details of their charges on their website, making it near impossible for prospective customers to make an informed choice or compare like for like. 

Which? chief executive, Peter Vicary-Smith, says:

“It’s a disgrace that insurers charge exorbitant fees to cancel, renew or  make basic changes to a policy. These charges should reflect the real cost to the company and not a way of making easy money from consumers who are already struggling with high and rising insurance premiums.

“We want insurance companies to be clearer about the fees that they charge and stop hiding the details away in pages of terms and conditions. The new regulator, the Financial Conduct Authority, must ensure that any charges reflect the actual cost incurred by the insurance provider.”

Notes to Editor

*Axa and Swiftcover charge no fee for changes of details if you do it online yourself, but incurs a £30 fee for offline changes.

1.The article ‘Rip-off’ insurers’ charges exposed’ appears in the May issue of Which? magazine. Please contact Ben Wicks for a full copy of the article.

Table notes

All scores are based on making policy changes or requesting duplicate documents offline. Where an insurer charges no fee for online changes, we have footnoted this, together with the potential impact on the insurer’s score.

a.  No duplicate document or policy amendment charge in first year, £21 thereafter. No cancellation fee in first 90 days, £30 thereafter. In first year, score would be 100%.

b. Fee only applies in the first two years of holding the policy and where the driver or address is changed. Where the fee does not apply, the insurer’s overall score increases to 68%.

c. Where the APR is variable, we asked for a quote for a 39-year-old male living in London and driving a Ford Focus Zetec.

d. 23.2% on 10 month bonus accelerator policy

e. No fee if customer makes change online. £30 if change made offline. If changes are made online, overall score would be 60%.

f. APR includes a £35 credit arrangement fee.

g. Adjustment fees range from £10 to £30.

h. No fee if changes are made online. Up to £30 fee otherwise. If changes are made online, overall score would be 60.

i. No fee if policy set up online. Also, the Hastings website previously stated that a £35 fee applies to customers requesting a duplicate document. However, the company has subsequently confirmed that the fee quoted on the Hastings website should have read £20. We have updated Hastings’ score based on the revised £20 charge. This fee is not charged if the duplicate document is sent by email or fax. If the policy is set up online and duplicate documents sent by fax or email, the overall score would be 34.

j. £35 fee applies where further work needs to be undertaken on a policy, such as change of address or change of vehicle. Other changes may not incur a fee.

Details correct: April 2012

Table notes

All scores are based on making policy changes or requesting duplicate documents offline. Where an insurer charges no fee for online changes, we have footnoted this, together with the potential impact on the insurer’s score.

a. If paid in 12 instalments. When paid by 5 instalments interest rate is reduced to 12.2%

b. Where the APR is variable, we asked for a quote for a 39-year-old male with five years’ no-claims discount, living in London with a 3-bedroom semi-detached house.

c. No charge if you update details online. Overall insurer score would then be 60%.

d. £55 in first year, £27.50 thereafter. Overall score from second year onwards is therefore 36%.

e. £30 for changes made offline. £0 for changes made online by the customer. If a customer makes all changes online, the insurer’s overall score would increase to 65%.

2. Axa doesn’t charge the fee if you change your details yourself online.

3. These admin charges are in addition to any adjustments to your premium to take account of changes in risk.

Press Release: Car, Consumer, Insurance, Personal Finance