Huge rise in extra charges from car insurers adds £200 a year to bills

MILLIONS of drivers could be paying hundreds of pounds more in admin charges on their car insurance following a huge fee hike, an investigation by The Sun has found.

Figures released by the Association of British Insurers (ABI) earlier this month found that the average cost of car insurance premiums fell to £622 in April to June, compared to £634 over the previous three months.

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This is the first time in two years that motor insurance premiums have fallen.

However, motorists could actually be forking out up to £200 extra in admin costs like renewal fees, cancellation charges and elusive "set-up fees".

These sneaky charges have always pushed up the cost of getting your car on the road.

But insurers have rapidly increased their admin costs over the past few years.

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So, while the overall cost of insurance may appear to be lower, these charges are contributing to keeping them high.

Research by GoCompare.com for The Sun shows that there is a huge discrepancy in what different providers charge, too, meaning some demand hundreds of pounds for services that other firms include for free.

For instance, if you paid the most expensive firms' admin charges, it would push your insurance bills up by £805, while the cheapest offerings add up to just £36.80 in admin costs.

Tom Banks, car insurance spokesperson for Go.Compare, explained: "Although we are starting to see the cost of car insurance fall this year, it is still a significant outgoing for motorists.

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"So it’s important for those purchasing a new policy to be aware of any extra admin costs that can come with car insurance.

"When you are looking at purchasing a new policy, it's worth noting if there are set-up fees, adjustment fees or cooling-off fees involved - this is especially important if you know you might need to change some of the details on your policy like your address."

If you choose a provider that doesn't charge admin costs you won't have to pay anything on top of your quoted deal.

To avoid being stung by high unexpected bills - it's important to look at the small print to see what your insurer will charge on top of its headline rate.

What the data shows

With the help of GoCompare and Defaqto, The Sun reviewed 296 comprehensive car insurance policies and found that in the last two years, the percentage of policies which charge a "setup fee" of more than £60 rose from 10% to 17%.

These fees are designed to cover the cost of arranging the policy, and some companies will charge you as much as £350 on top of your actual premium.

However, these tend to be buried in your premium, so you might not even realise you're paying them.

The percentage of policies now charging a renewal fee of more than £60 has also now jumped to 14%, up from 9%.

And the average fee has risen from £39.06 in 2022 to £49.08 in 2024.

But those on the most expensive policies could find themselves forking out an extra £150 just to renew their policy.

And, insurers have hugely increased their cancellation charges by up to 31% since 2022.

Drivers can cancel their insurance at any time during the term of the policy if they no longer need it.

Insurers are also legally required to give a 14-day "cooling-off" period, so motorists who end a policy within the first two weeks can get a refund.

But even in those early weeks, many insurers charge an administration fee to cancel.

Do this within the 14 days and most will be charged a fee of between £8.40 and £125.

But cancel after the cooling off period and you'll could face charges between £8.40 and £180 - on top of not being able to get a full refund.

A spokesperson for the Association of British insurers said: "Insurers' first priority is to support their customers and they're committed to providing the best possible service.

"Like other businesses, some insurers may charge administrative fees to cover the cost of setting up, maintaining, changing, or closing a policy.

"These costs are not immune to inflation, but will always be set out transparently to the customer and only used in line with FCA regulations."

How to cut your car insurance premium

The average car insurance premium costs a typical driver £634, according to the ABI.

This represents a fall of 2%, when the cost of an average premium peaked at £635 a year in the first quarter of the year.

However, young drivers will still pay considerably more to insure their vehicle.

Plus, the average driver will still have to fork out over £111 more on their policy compared to the same time period a year ago when the average premium was £511.

But there are several ways to slash those costs.

Shop around and haggle

Automatically renewing car insurance might seem convenient, but it can often lead to missed savings.

However, motorists should always compare quotes from multiple providers before acting on their renewal.

Starting the search about a month before the existing policy expires allows ample time to explore better deals.

Not all comparison sites have the same range of insurers, so it’s a good idea check two or three from GoCompare, Compare the Market, MoneySuperMarket and Confused.com.

If you and do not want to insurer, ask yours to match the cheapest deal you have found.

If they do, great — but if they don't, then it's time to ditch and switch.

Pay upfront

Many insurers charge extra fees for monthly payment plans.

These can vary, but might include set-up fees, transaction charges or interest for spreading the cost over several months.

By paying annually, you can avoid these extra costs and keep more money in your pocket.

Drivers can typically save up to £46 by paying for their annual car insurance premium in one lump sum, according to Compare the Market.

Tweak your job

Certain jobs are seen as more risky than others for insurance purposes.

So making small but accurate changes to your job title can save you money.

For example, swapping your role from "chef" to "caterer" can save you £20, GoCompare found.

And changing from “fast food delivery driver” to “delivery driver” could save you £40.

But lying about your job could invalidate your policy, so make sure any tweaks are legitimate and accurate.

Save the date

Renewing your car insurance sooner rather than later could save you some cash.

New cover becomes more expensive the closer you get to renewal. You can buy your insurance up to 29 days before the policy start date and "lock in" the price you are quoted that day.

According to GoCompare, a typical driver can save up to £265 by buying new cover at least 27 days before their current policy ends.

Increase your excess

Your excess is what you agree to pay each time you need to make a claim on your policy.

When setting up, you can usually choose your own excess, which can be as low as £100 and as high as £500 or more.

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The higher your excess, the lower your premium and vice versa. This means you could lower the cost of your insurance by agreeing to pay more if you need to make a claim.

But before you hike your excess, make sure you would be able to afford it if necessary.