Huge rise in extra charges from car insurers adds £140 a year to bills
HUGE rises in the admins fees charged by car insurance providers could mean that you're paying hundreds more each year than you expect to.
When you add up extras such as adjustment fees, cancellation charges and set-up fees, motorists pay £140 more than their headline insurance rate annually.
These sneaky charges have always meant that getting your car on the road is more expensive that it might seem, but insurers have rapidly increased prices meaning that many people will be substantially out of pocket.
On top of inflation-busting rises, research from GoCompare.com shows that there is a huge discrepancy in what different providers charge, meaning some demand hundreds of pounds for a service that others provide for free.
For instance, if you paid the most expensive charges for the top four fees it would push your insurance bills up by £560.27, while the cheapest offerings add up to just £30.
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.
Here's four of the most common admin fees to look out for.
Adjustment fees
- Price increase since 2012 - 38 per cent
- Range of charges - £7.50 - £70.50
- Percentage of insurers that charge - 73 per cent
- Average cost to drivers - £28.25
These are the fees insurers charge you if you have to make a change to a policy, such as changing your name, adding or removing a named driver or updating your address or occupation.
There's no way to avoid the fees, since failing to update your provider about a change of circumstance can invalidate your insurance.
When choosing cover, make sure you check what your chosen insurance company charges, particularly if you're planning to change your name, move house or get a new job.
Fees range from £7.50 to £70.50 so finding the right policy can make a huge difference.
How to make sure you don't overpay for insurance admin fees
Lee Griffin, founder and CEO if Go Compare explains how to make sure you don't get stung with huge charges
- 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
Cancellation charges
- Price increase since 2012 - 49 per cent
- Range of charges - £7.50 - £300
- Percentage of insurers that charge - 79 per cent
- Average cost to drivers - £60.85
Drivers can cancel their insurance at any time during the term of the policy if they no longer need it.
Insurers are 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 an administration fee may still be applicable.
Cancellation charges have increased by 49 per cent since 2012, with the average charging now standing at £60.85.
Shockingly, some insurers charge a whopping 300 per cent to customers that want to cancel, so it's really important to check the fine print before you buy.
Set-up fees
- Price increase since 2012 - 82 per cent
- Range of charges - £10-£150
- Percentage of insurers that charge - 38 per cent
- Average cost to drivers - £37.63
Set up fees are still relatively rare, with only 38 per cent of insurers charging them, according to Go Compare.
But that's compare to just 12 per cent of providers charging in 2012, so these fees are clearly on the rise.
These fees are designed to cover the cost of arranging the policy and some companies will charge you as much as £150 on top of your premiums.
With 62 per cent not charging at all, shopping around should be able to bring this cost to zero fairly easily.
How to cut the cost of your car insurance
THERE are lots of ways to bring premiums down - here's some of the best ways to save:
- Save £88 – by using the right job titleYour occupation is one of the major pieces of information that insurers use to work out your insurance premium.Ultimately, some jobs are viewed as more "risky" than others.For instance, if you're a professional footballer, you're likely to shell out more for your cover than a priest.But sometimes there's more than one job title on the pre-defined list that accurately describes what you do.Picking the right one could lead to significant savings.For example, someone who selects "chef" could pay as much as £88* more than someone who selects "kitchen staff".
Other jobs that tend to have a lot of similar options include office work, building and construction, teaching and journalism.
Don't lie about your job though - you'll invalidate your cover.
*Based on a 31 year old male, living in Reading, driving a Vauxhall Corsa - Save £520 – by adding a more experienced driver to your policy
Inexperienced and young drivers typically face the highest premiums – but could save up to £520* by adding more experienced drivers to their policy.While new or younger drivers are likely to see the biggest savings, this applies to everyone, even if you’re seen as a low risk driver yourself.
Make sure you're not illegally "fronting", which is where younger or less experienced drivers claim to be the ‘named’ – additional driver, when they’re actually the sole or main user of the vehicle.
*Based on an 18 year old, living in North London, driving a Vauxhall Corsa
- Save £76 – by planning ahead if you buy in advance
While people rarely look forward to buying insurance, getting it done as early as possible could save you more than you might think.
On average, Go Compare found car insurance is £76 cheaper if bought a week before its start date.
- Save £120 – by paying annually
Paying monthly is convenient and affordable but it's almost always more expensive than paying for your insurance in one lump sum. Paying annually could save you around £120*.
*Based on a 31 year old, living in Newport, driving a Vauxhall Corsa, paying monthly compared to paying annually.
- Save £280 - when you shop aroundThe only way to make sure you’re securing the best deal on your car insurance is to shop around - and the good news is, it only take a few minutes. Try comparison sites such as Go Compare, Compare the Market and Money Supermarket
Duplicate document fees
- Price increase since 2012 - down 25 per cent
- Range of charges - £75 - £39.77
- Percentage of insurers that charge - 35 per cent
- Average cost to drivers - £13.85
This was the only fee that has fallen since 2012, so it's one way you can actually save some money.
This is probably because digital documents have become more common recently.
Definitely double check your policy before you buy though, even though most insurers don't charge you anything at all, some will make you pay almost £40.
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