Why am I being charged a fee?
The answer is simple, it is because the company charging it either cannot survive without charging it, or the company charging it knows it can get away with it… in the majority of cases anyway.
How is the Fee Calculated?
In several ways. Insurance is highly competitive so one thing a company looks at is the fees that its competitors are charging. If it is working for them, then its’s about right. Next, they will look at their own costs. This varies whether you are dealing direct with an insurance company, or using an intermediary such as a broker or online comparison company.
If you are using a broker that has given you a service such as professional advice, then you would expect a fee would go toward the the cost of running an office, training and regulatory costs. If you are not getting advice, either going online or direct, then your attitude toward the fee would, I suspect be very different.
The Gift that Keeps Giving!
While, in a lot of cases, an appropriate fee can be justified at the commencement of a policy, the ongoing fees that are levied are a lot more difficult to defend.
It is crucial that you keep your insurance provider up to date with changes in your circumstances. If you do not, then your cover is very much at risk. However, one off charges of up to £50 for changing your address or adding (or taking off) a named driver from your policy are, frankly, outrageous.
There is no doubt that the competitive nature of the cost of insurance means that companies do what they can to show a premium as low as they can get it. There is an argument that says this in itself is a huge problem because it may also be that the low premium is because the cover given is not that great. That’s a discussion for another day. With regards to fees and admin charges, they help to boost the income of the insurance provider whilst allowing them to appear to give good value premiums.
What Can I Do About It?
Insurance providers love people that are lazy. People that don’t bother to shop around at renewal, people who just let their direct debit chug along without checking the amount going out, and definitely people who do not question what they are up to. If you see an admin fee on your new quote, or on your renewal, the first thing to ask yourself is do you think it is reasonable? As I said before, there is a genuine case for reasonable admin fees. If however you do not think it is, then talk to them. They may convince you that it is justified, or, you may convince them to reduce it or get rid of it altogether!
Fees that are charged for changes to your policy are a little more tricky to deal with. To get the best result here you need to have looked at the terms and conditions of the policy at outset. You would at least be aware of the costs involved before you make changes. It is still the case though that you can contact your provider and see if the charges can be cancelled. You won’t be lucky every time, but in my experience the chances are about 50/50. Don’t forget that you can switch providers during the term of your policy. You need to be careful here as there are repercussions regarding the allocation of No Claims Discount, especially on motor policies, but if this is not an issue then you should be able to switch providers quite easily in order to get a better deal following something like a change of address.