Lancaster Insurance want a fee to cancel after selling

[Blondmusic]

This is on behalf of a friend of mine.

 

He owned a Classic Morris car which he insured with Lancaster Insurance at the price of £68 for a full years cover which he paid in full. Now he has sold the car and is getting something more modern. Lancaster Insurance told him that if he takes a new policy for his new car then they would waive the £50 cancellation fee but if he takes cover elsewhere they want £50.

 

He was hoping just to transfer the policy over to another car but Lancaster Insurance quoted him almost £500 but he managed to get a much cheaper quote, almost half price, elsewhere on comparison sites.

 

Now I feel a cancellation fee of £50 is excessive given the price of the policy for a year at £68. They even refuse to refund him for the 4 months which was left to run stating that once the policy has run for 8 months they don't refund anything. They even told him that if he had not sold the car and let the policy run he would only be able to transfer the NCD to another classic car.

 

Can anyone help with this?

[marmaris30]

Couldn't he just let the policy time out, thereby avoiding the cancellation fee? £68 for a year's insurance is very cheap anyway.

[Blondmusic]

Because he told them he sold the vehicle they are cancelling it and charging him the £50

[marmaris30]

I'm not sure there's very much he can do about it then. I'm afraid contractual cancellation and admin fees are normal in insurance these days, and with such a low premium, they might argue that admin fees are justified by the extra work incurred.

 

Insurance fees unfortunately haven't yet come under the kind of scrutiny that bank charges did, and I'm not aware of any legal grounds for arguing that the fee is unreasonable. In any case, they'd probably argue that classic car insurance is a specialist product anyway, by way of justification.

[unclebulgaria67]

I'm not sure there's very much he can do about it then. I'm afraid contractual cancellation and admin fees are normal in insurance these days, and with such a low premium, they might argue that admin fees are justified by the extra work incurred.

 

Insurance fees unfortunately haven't yet come under the kind of scrutiny that bank charges did, and I'm not aware of any legal grounds for arguing that the fee is unreasonable. In any case, they'd probably argue that classic car insurance is a specialist product anyway, by way of justification.

 

The smart move here is to register a written complaint stating that the £50 is excessive given the annual premium of £68 and therefore it is the intention to elevate the complaint to the FOS. Ask for Lancaster to provide their final response that they insist on the £50 cancellation fee and are happy for the complaint to be passed to the FOS.

 

Then see how Lancaster respond. I think the FOS may not see the £50 cancellation fee as excessive, as it relates to the admin costs incurred by Lancaster and is not related to the policy premium. However, Lancaster may decide that they cannot be bothered in dealing with such a complaint, even if it is without merit and will therefore write off the cancellation charge.

[Blondmusic]

Thanks Uncle Bulgaria. I will get a letter sorted and in the post asap.

[manofmystery]

Just tell them that you have no insurable interest, the policy is no longer valid as you are unable to make a claim. How can they charge you for something you can never claim from?

 

If that fails then as Unclebulgaria67 said, go down the FoS route.

[unclebulgaria67]

Just tell them that you have no insurable interest, the policy is no longer valid as you are unable to make a claim. How can they charge you for something you can never claim from?

 

If that fails then as Unclebulgaria67 said, go down the FoS route.

 

They bought a 12 month policy, under which it states that if you cancel mid term a £50 cancellation admin fee will be charged. Also under the terms of the policy, there will be a condition to inform the Insurers of any significant changes e.g selling the vehicle.

 

People have to be very careful not advising their Insurers when they sell a vehicle. There have been cases where the new owner has not taken out any insurance and under the Road Traffic Act (RTA) there has been a claim by a third party against the only existing insurance for the vehicle. Apparently under the RTA, if there is any insurance in existance, the Insurers have to pick up the risk, rather than the MIB getting involved. The Insurers then come after their policyholder for them breaching the terms of the contract, by not informing them that the vehicle had been sold. There was a case in the last year or so, when Insurers took their policyholder to court for £30k. I don't know what the outcome was, as that has not been reported. It may still be ongoing.

[dacouc]

They bought a 12 month policy, under which it states that if you cancel mid term a £50 cancellation admin fee will be charged. Also under the terms of the policy, there will be a condition to inform the Insurers of any significant changes e.g selling the vehicle.

 

People have to be very careful not advising their Insurers when they sell a vehicle. There have been cases where the new owner has not taken out any insurance and under the Road Traffic Act (RTA) there has been a claim by a third party against the only existing insurance for the vehicle. Apparently under the RTA, if there is any insurance in existance, the Insurers have to pick up the risk, rather than the MIB getting involved. The Insurers then come after their policyholder for them breaching the terms of the contract, by not informing them that the vehicle had been sold. There was a case in the last year or so, when Insurers took their policyholder to court for £30k. I don't know what the outcome was, as that has not been reported. It may still be ongoing.

 

Indeed there was a case last year that received media attention, a motorcyclist did not cancel his insurance when e cancelled as he wanted to avoid the fee, the new owner had an accident and had not insured the bike. The sellers Insurers had to pay out and they then started to pursue him for upwards of £30k.

 

The Insurers were duty bound by the RTA due to there being a current Certificate, they then recover their outlay from their (ex) client under the clause virtually all Insurers include on motor policies which in effect states "We will seek to recover any monies we are duty bound to pay due to statute that we would otherwise not have had to pay.

 

It's relatively rare but does happen, I've seen it with my own clients a few times