Cancellation charge?

[JackieJ]

Hi,

 

Wondering if someone can help me here. I had car insurance with Norwich Union for over 5 years and never made a claim. I asked them to quote on my new car and it was astronomical so went with another company. I have paid every month by DD and never missed a payment. As stated, I have also never made a claim so I have cost Norwich Union nothing to insure me. I have had a letter from them demanding £49.60 'cancellation charge'. Now, we know that the 'penalty charges' from the banks have to represent the cost them for a customer going over their limit etc - is there anything similar regarding a 'cancellation charge'. I haven't got £50 to pay them and it actually cost me money to cancel with them, phone calls, sending document back etc etc etc. I am now being threatened with court action.

I should add that I also have life insurance with NU and have found another company will cover me for £20 per month cheaper but are NU going to charge me for cancelling again?

 

The issue is that for me, NU are not providing competetive products so why am I having to pay out extra because of this?

 

Jackie

[dpick]

Hi NU tried this with me, don't know if you have same case my car insurance was due to be renewed end Jan 2008 found that I could get same cover £90 less advised them that if they did not meet this I would transfer insurance. They said that they could not and then tried to charge me a cancellation charge I told the to bugger off as of last day on insurance I had no contract with them I did not have to renew my insurance with them.

 

dpick:)

[LemonTwist]

Hi,

 

Wondering if someone can help me here. I had car insurance with Norwich Union for over 5 years and never made a claim. I asked them to quote on my new car and it was astronomical so went with another company. I have paid every month by DD and never missed a payment. As stated, I have also never made a claim so I have cost Norwich Union nothing to insure me. I have had a letter from them demanding £49.60 'cancellation charge'. Now, we know that the 'penalty charges' from the banks have to represent the cost them for a customer going over their limit etc - is there anything similar regarding a 'cancellation charge'. I haven't got £50 to pay them and it actually cost me money to cancel with them, phone calls, sending document back etc etc etc. I am now being threatened with court action.

I should add that I also have life insurance with NU and have found another company will cover me for £20 per month cheaper but are NU going to charge me for cancelling again?

 

The issue is that for me, NU are not providing competetive products so why am I having to pay out extra because of this?

 

Jackie

 

I'm afraid it's correct that a cancellation fee is charged if you cancel a policy mid-term. As stated in the policy booklet, it can be anything up to £52.50. It is not classed as a penalty charge, as the FSA/FOS say it is OK to charge anything up £50 as a cancellation fee (the other £2.50 is insurance premium tax which goes to the government).

 

This is what it says in the "Cancellation Rights" section of the policy booklet:

 

You have a statutory right to cancel your policy

within 14 days from the day of the purchase of

the contract or the day on which you receive

your policy documentation, whichever is later.

If you wish to do so and the insurance cover

has not yet commenced, you will be entitled to

a full refund of the premium paid.

Alternatively, if you wish to do so and the

insurance cover has already commenced, you

will be entitled to a refund of the premium

paid subject to a deduction for the time for

which you have been covered. This will be

calculated on a pro-rata basis for the period

you have received cover. There will also be an

additional charge of up to £52.50 (inclusive

of Insurance Premium Tax where applicable)

to cover the administrative cost of providing

the policy.

 

I'm sorry I'm not 100% sure of the answer to your question about cancelling life insurance, as I work in the general insurance side. I don't think there is a fee for cancelling it though, it's just that you can't get a refund of the premiums paid as there is no cash-in value for a standard life policy.

 

dpick - if you called to cancel the policy before it had a chance to renew (with the cancellation taking effect from what would have been the renewal date), then you shouldn't have been charged the fee, and you were correct to refuse to pay it.

 

This is what the Financial Ombudsman Service has said about this matter: issue 54 - July 2006

Edited July 11, 2008 by LemonTwist

[JackieJ]

Lemon Twist,

 

Thanks for that - still seems quite unfair though doesn't it? Am going to write them a letter anyway I think and appeal to their better nature? I have been a good customer to them and this will give them an opportunity to show how valued I am (still currently have life insurance with them)....Worth a try anyway as haven't got £49.60 anyway!

[JackieJ]

Dpick,

 

Thanks for your reply as well - mine wasn't due for renewal but I couldn't afford to pay NU what they wanted to insure my new car until renewal time!

[LemonTwist]

Lemon Twist,

 

Thanks for that - still seems quite unfair though doesn't it? Am going to write them a letter anyway I think and appeal to their better nature? I have been a good customer to them and this will give them an opportunity to show how valued I am (still currently have life insurance with them)....Worth a try anyway as haven't got £49.60 anyway!

 

Yes, I see what you mean when you say it seems unfair. If it was up to me personally, long-term customers wouldn't be charged a cancellation fee, particularly if they've made no claims.

 

Cancellation fees don't automatically get written off following a letter of complaint, but in some cases they are waived as a gesture of goodwill, so I agree it's a good idea to write a letter anyway.

[JackieJ]

Thanks Lemon Twist - let me know when you start up your own insurance company and I will give you all my business!!!

 

Letter to go tomorrow x

[LemonTwist]

Thanks Lemon Twist - let me know when you start up your own insurance company and I will give you all my business!!!

 

Letter to go tomorrow x

 

Pleased to help! Let me know what the outcome is.

[JackieJ]

Well, it took some time and numerous e-mails but I can report some success in that they have reduced the cancellation fee to just over £20 which is a result!!

I did have some problems with them referring the matter to Wescot and random solicitors but think will accept this reduced figure and pay this as it is less than half of their original requests.

All their e-mails were very polite and helpful and don't think I will get much further if I push it.

Any thoughts?

[LemonTwist]

Yes, I think the fee being reduced to £20 is probably the best you could hope for in this case.

 

There is some good news though. It seems like our campaigning is having some effect - I just heard today that the standard cancellation fee for motor policies is being reduced to £39.90, down from the previous £52.50. Not all the policy booklets have been updated yet, although the third party fire and theft one has. I'm not sure if this applies to existing customers as well as new ones, but I'd assume it applies to both. It's not a massive reduction, but I certainly think it's a step in the right direction.

[Bookworm]

I quite disagree with Lemontwist.

 

Simply because their T&C say they can charge up to £50 doesn't make it right or lawful, and reading the link she quotes, I don't see that the FOS says that either. :-?

 

They do refer to the UTCCR and they do take a dim view of extravagant charges.

 

OP asked for a quote for his NEW car, thereby setting up a new contract. If s/he then cancelled policy on old car, why should s/he then get penalised for wanting to take their custom elsewhere? If NU can't offer competitive cover, it's their problem and I would argue every penny of that charge, asking the insurance company to show justification (apart from the ubiquitous T&Cs! ) of that cost and the reasoning to levy it.

[daviet1976]

I agree with Bookie.

 

There's NO WAY it costs an underwriter £50 in time and effort to cancel a policy.

 

Most of the work is done by the customer! We are searching for competitors, looking for cheaper quotes, calling to cancel our existing policy, sending the insurance certificate, etc, etc.

 

Maybe we should draft our own T&C!

[orfoster]

I have to agree with Bookworm, the amound of cancellation fees I have helped friends get wiped from various car insurance companies tell the tale!

 

How can it cost anything more than £3 to cancel a policy, in most cases they tick a few boxes and click finish!

 

I am currently helping a friend challenge a £76 cancellation fee with Direct Line, no way is it true to their costs but if they can show me their costs etc and it totals £76 then thats fine. lol