Drivers caught out by insurance sneak fees

Motor insurers are following the example of mortgage lenders by charging high fees for relatively small administrative tasks.


Many insurers impose 'admin' charges of up to £25 for basic paperwork, such as changing a customer's address during the term of an insurance policy.


Where the changes affect the risk - when drivers move from a safer to more dangerous area, for example - it is understandable that premiums will increase, but customers are objecting to charges levied supposedly to cover only the administration.


Research from the price comparison website uSwitch.com claims that 14 million motorists a year are hit by steep fees for altering their car insurance policies mid-term, earning insurers more than £330m.


The worst offenders include Budget Insurance - which charges a flat fee of £25 for mid-term changes made to a policy - and More Than, which imposes a fee of between £15 and £25. Churchill levies an extra £21 and esure and Sheilas' Wheels charge £17.50. Tesco charges £15.75.


Ian Crowder of the AA says his organisation does not charge for a change of address made mid-term, but will levy a fee of £25 for 'major changes' such as adding a permanent additional driver to the policy.


A spokeswoman for Budget Insurance says its customers are made aware of the charges for mid-term changes both in phone calls and in the policy documents. 'This fee is in line with many of our competitors, she says.' Those that will make changes free of charge include swiftcover.com, RAC Direct and Zurich.


Debra Williams, managing director of price comparison website confused.com, warns drivers to bear in mind administrative fees when choosing an insurer.


'We recommend that everyone checks the terms and conditions carefully to ensure that they are aware of the costs of making any amendments,' she says.


Williams says high administration fees could discourage policyholders from being open and honest with their insurers, leading to problems when claims are made.


James Gray, 24, who works in business development for an events company, has moved house three times in the past two years and now lives in Thatcham, Berkshire, where he plans on staying.


He had to pay elephant.co.uk, his former insurer, three administration fees of £14 for changing his address details - even though he was not paying more for the actual cover.


'Given that most changes can be done at the push of a button, it seems unfair that the fee is so high,' he says.


When his annual policy ended, James turned to price comparison websites, including confused.com, to find a better deal. He eventually decided on Admiral - which does not charge a fee for mid-term changes.


James says: 'I have no plans to move again, but at least I know that if I need to make any changes, I won't face a hefty administration charge.' To add to the financial pain felt by drivers who make changes mid-term, possible large premium increases can be imposed when policies come up for renewal.


Premiums are based partly on the area in which people live, so moving to a different area could mean a rise in the cost of cover.


Switching car will also affect premiums, while people who commit a driving offence or have an accident - even if they were not at fault - could also see costs go up.


James fell foul of this. In November, he had three penalty points added to his licence for using his mobile phone while driving.


Though Admiral made no change to his policy or premium at the time, when it came up for renewal, the cost rose by more than £300 to £1,500 to cover both his cars - a Vauxhall Corsa and the sporty VX220.