Which? calls for end to rip-off car insurance fees

New Which? research reveals a big variation in the fees that car insurers are charging, with some levying eye-watering fees that don’t seem to reflect the cost to the company. 

As part of our campaign to Stop Sneaky Fees and Charges, we looked at the different types of administration fees used by car insurance providers to see how they compare. We found charges can vary widely between companies, with some insurers charging more than double the average for certain fees.

Of the 44 insurers we looked at, we found:

  • Five insurers don’t have any adjustment fees – charges for things like changing your name, address or job – while IGO4 Insurance charges £35, over £10 more than the average (£22.79).
  • Two thirds (30) charge for cancelling during the 14 day cooling-off period, with the highest charges from IGO4 (£75) and LV (£40).
  • While Age UK, NFU Mutual, Volkswagen and Volvo don’t charge any cancellation fees for ending the policy early, the average cost is £49.55 and three insurers – Budget, Endsleigh, and IGO4 – all charge £75.
  • Four insurers charge set-up and renewal fees – to pay for the cost of arranging cover – including 1st Central which charges £50 for both and Hastings Direct which charges £20 on renewal.
  • The average charge for sending out a replacement insurance certificate or a copy of the policy document is £14.18, but Axa and Swiftcover both charge £30 – more than double. Ten insurers don’t charge at all.
  • Kwik-Fit has the highest fees for paying your car insurance monthly, charging a fee of £35 plus a variable interest rate, which are combined to create an APR. In our scenario it offered us an APR of 64.4%, compared to an average of 22.6%.

Previous Which? research found that two thirds (68%) of consumers think companies use separate fees to trick people into thinking the product or service is cheaper than it is. With such a huge variation between providers, we want the companies using these rip-off fees to justify why they are charging such a high amount for what are, in some cases, simple policy changes.

We’re calling for all fees associated with setting up, amending or duplicating any type of insurance policy to be reasonable and no more than the cost to the company. We also want companies to set out all fees and charges clearly so that people can easily compare between providers.

Which? executive director, Richard Lloyd, said: 

“We’ve found some insurers charging customers eye-watering admin fees that can be hard to avoid, and people often don’t know what they are actually paying for. We want companies to ensure their fees reflect actual costs and aren’t just a way to squeeze more money from customers.”

Our top tips to avoid car insurance admin charges:

  1. Consider using a 0% credit card – if you can’t afford to pay annually for your cover consider using a 0% credit card with at least 12 months of interest-free purchases, which could help you avoid high interest rates.
  2. Do it online – many companies charge you to make adjustment fees if you call them, but allow you to change your policy online free of charge.
  3. Haggle – you may be able to avoid renewal fees and duplicate document fees if you haggle with your insurer and see if you can get them dropped.

Notes to editors:

  1. Full results:

sneaky fees

  1. Methodology: We reviewed the fees of 44 car insurers between May and August 2015 via surveys to insurers and by examining policy terms and conditions. Each provider was scored on each if its charges to produce an overall Which? fees score. The average fee for each category excludes companies that do not charge a fee.
  2. Methodology for previous consumer survey: Populus, on behalf of Which?, interviewed a representative sample of 2057 UK adults online between 16thand 17th July 2014. Data were weighted to be demographically representative of all UK adults. Populus is a member of the British Polling Council and abides by its rules. Overall, 949 respondents had paid a fee or charge on the financial products we asked about in the last 12 months.
  3. As part of the Stop Sneaky Fees and Charges campaign, Which? is also currently working with the Council of Mortgage Lenders to improve the information given to consumers so it’s easier to understand mortgage fees and charges and compare the overall cost of borrowing. An interim report was published at the Budget in March and the final report will be published later this summer.
  4. Our campaign is calling on companies to take action and:
  • Don’t hide the full cost from customers: Fees that are part of the total cost of a product should be prominently and clearly displayed.
  • Stop making it hard to compare prices: It should be easy to work out the best deal, taking all fees and charges into account.
  • Stop stinging customers with rip off additional charges: Extra compulsory fees after you’ve purchased a product should be cost-reflective.

Press Release: ,