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Car insurance providers charge rip-off admin fees

Motorists pay up to £75 to cancel policy

Car insurance 3

Car insurers are charging startlingly expensive administration fees that don’t seem to reflect the cost to the company.

A new Which? investigation, which examined 44 providers, found that these one-off charges can vary widely between companies, with some insurers charging more than double the average for certain fees.

We know that consumers often think companies use separate fees to trick people into thinking a product or service is cheaper than it is.

Find out more: Car insurance add-ons – a full breakdown of the fees charged by each provider

Charges for setting up your cover

We discovered that 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.

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%.

What’s more, 1st Central charges a 2% fee to pay by credit card, while Admiral, Diamond and Elephant all charge £5.95, despite 36 insurers not charging.

Find out more: Car insurance reviews – dozens of insurers rated

Charges for cancelling your cover

Three insurers – Budget, Endsleigh and IGO4 – charge £75 for cancellation, which is much higher than the average fee of £49.55.

In addition, 30 insurers charge for cancelling during the 14 day cooling-off period, with the highest charges from IGO4 (£75) and LV (£40).

While some providers don’t have any adjustment fees – for changing your name, address or job – IGO4 Insurance charges £35, over £10 more than the average of £22.79.

Meanwhile, Axa and Swiftcover both charge £30 for sending out a replacement insurance certificate or a copy of the policy document – more than double the average of charge of £14.

Know your rights: Can I get a refund if I cancel my insurance? – see our consumer rights guide

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

As part of our Stop Sneaky Fees and Charges campaign, 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.’

Find out more: Stop Sneaky Fees and Charges campaign – support the campaign by signing our petition 

Our top tips to avoid car insurance admin charges

1. Use a credit card

If you can’t afford to pay annually consider using a 0% credit card with at least 12 months of interest-free purchases, which will help you avoid high interest rates. See our guide on how to find the best interest-free credit card.

2. Amend your car insurance 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. Our guide on haggling on your car insurance includes a field-tested script which you can use to help you. 

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