Car insurance firms pocket over £71million through early exit cancellation fees
Martin Lewis offers advice about cancelling car insurance
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New data shows around 1.3 million car insurance policies are cancelled each year in the UK. Insurers charge around £55 each for an early cancellation fee meaning firms could be receiving up to £71.5million in early exit fees.
These cancellation fees vary between insurance providers and can rise up to £155 in some cases.
Some insurance firms have even been known to charge motorists for cancelling a policy within the 14 day cooling-off period to grab money off undecided customers.
According to experts at car insurance experts Cuvva, many drivers are not aware of the true cost of changing policies.
They say added fees can be hidden in technical wording leaving divers caught out when they come to make adjustments to their scheme.
Freddy Macnamara, CEO at Cuvva said insurance forms needed a “radical overhaul” to better serve drivers.
He has called for firms to be “transparent” about the fees they charge and are then “penalised” if their circumstances change.
He said: “Insurance needs a radical overhaul. Insurers need to be transparent about the fees they charge and products need to meet customers’ needs.
“Millions of UK drivers are between a rock and hard place.
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“They’re locked into annual car insurance contracts because there aren’t viable alternatives and are then penalised if their circumstances change and they end a policy early.”
Cuvva has urged road users to ask an insurer to list all the additional costs associated with a policy before they sign up.
It warns a policy may look like a good deal but added fees can add up to be a lot more expensive than first imagined.
It urged road users to consider more flexible car insurance policies which do not charge fixed cancellation fees.
A flexible policy means drivers are not tied down to a fixed contract and can leave at shorter notice.
Compare the Market has warned those who pay fixed contracts every month could be worst affected by a cancellation.
It warned drivers might need to “pay extra” to cover the time they have already been insured on top of extra admin and cancellation fees.
The insurance experts said drivers can try to dispute the cancellation fees but this is unlikely to be successful.
It said: “If you pay for your insurance monthly, then you might not get a refund.
“In fact, you may have to pay extra to cover the time you’ve been insured, as well as a cancellation fee and any administration charges.”
It added: “You can try to dispute the cancellation costs, but you may not be successful.
“A better option is to make sure you know exactly what the cancellation fees are before you take out the policy, so you aren’t hit with any surprises.
“If you think the charges are excessive and you can explain why you think they’re unfair, you should talk to your insurance provider directly.”
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