A new Which? investigation exposes the home and car insurers that appear to be taking consumers for a ride with exorbitant ‘hidden’ fees for basic policy changes and renewals.
Expensive changes to car and home insurance policies
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.
For example, AXA and Swiftcover charge a flat fee of £30 to simply update your address details or change your vehicle (though online changes are free).
Some insurance companies also 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 if you set up your policy offline (for example by phone). Cancelling your policy can also prove costly, with Budget Insurance charging as much as £75 just to cancel a car insurance policy.
To find out how much your insurer charges for minor changes, read our guides to car insurance charges and home insurance charges.
Excessive interest rates on monthly instalments
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 charge 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.
Insurance costs must reflect true cost to insurer
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.’