Motor Insurance-cancelled policy charge

[jojo36]

Hi
Story is a bit long winded , but I here goes and I will tryto shorten it.
Basically I took out a motor policy with my son as the named driver, and me an additional driver. As I currently have 10 years no claims this is what I stated on the application. However, as I currently have a car of my own, and this policy was for a second car, I was unaware that I could not use my no claims bonus on a second car. The premium was at this stage £89 p.m and I sent in the proof of no claims as requested. They then sent me a letter stating the no claims was invalid.
I then rang them up to say that the no claims was current on my vehicle, and could I not use this on the second vehicle as well?( as , lets be honest, I cannot possibly drive two vehicles at the same time, so I fail too see why this cant be done!) The gentleman didnt have a clue, and I spent half an hour on hold while he tried to find out!
Anyway to cut a long story short, they said I couldnt and that the premium would now go up as we had no no claims discount.
The premium rose to £190 p.m, and as this is my 18 yr old sons policy , the first premium at this new rate, bounced as he had insufficient funds in the account!
The insurance company then duly cancelled the policy for non payment. However, they are now saying that he owes them £300.00 for cancelling the policy.
My questions are as follows:
1. Can they charge him this, when they themselves cancelled the policy?
2. If they increase the premium due to lack of information, or change to policy, are we not allowed to terminate the agreement due to it not being the rate we agreed to in the first place?

[rudekid48]

I'm not going to go into the £300 charge as I don't know the detail but all i would say is that by the sounds of it you have not made any payments and so there will be a Time on Risk charge due for the time that you have had on cover. This will be based on the full annual premium without your bonus and so this does not sound too far fetched.

BUT...... lets be honest here, you tried to buck the system and get cheaper insurance for your son by putting it in your name and trying to use your bonus that you were already getting the benefits of elsewhere. You have been found out and don't like it.

No Insurer will let you use your NCB on more than one policy. Some will allow what they call a 'mirrored' bonus on a second car but not if there are young drivers on the policy.

Apologies if I don't sound too sympathetic but people have to realise that Insurance companies are not stupid and it is obvious when someone is trying to get cheaper cover for a young driver.

In summary, you have had time on cover and so are liable to pay for it. It is still worth asking for a breakdown of the charge but based on the figures you have quoted (£190 per month), a £300 time on risk does not sound unreasonable.

[jojo36]

I would like to correct you here on two points. I did not try to "Buck" the system at all.
I own two cars. One is mine alone and I would not allow my son to drive it. The second also mine, is only a little run around and I couldnt care less if my son gets a few scratches. The insurance company was told I had ten years no claims(truth!) and my son NONE! so where did I buck the system???
Secondly, three installments were paid at the rate of £89.00 per month. However, when I called them to discuss the no claims discount ( again, I called to discuss it with them as I was unsure about NCD on a second car, so NO I did not get rumbled!) and they explained the situation, the premium then went up. At this point the installment bounced as there was insufficient funds in the account to cover the DD, and was then cancelled by the insurance company.
There really is no need to be so cynical! We are not all out to "crook" the system as you implied, just not all aware of the procedure with regards second vehicles as we have never been in that situation before, and I would hardly call a policy for £1400.00 " getting cheap insurance" for my son!

[rudekid48]

Re-read your first post... "as this is my 18yr old sons policy".

If it is your sons policy, why not insure it in his name? Answer - because you thought it would be cheaper in yours.

You are also quite correct as you state that you cannot possibly drive two cars at the same time, therefore would it not be fair to say that your son would be the main user of the 2nd car?

You also confirm that the DD bounced because your son was paying it, again this confirms taht this in all intents and purposes was HIS policy, so I don't understand what you are actually complaining about.

If you had checked prices in your sons name it would have been very expensive, but hey presto, if you put it in your name and try to use your NCB on it, the price reduces dramatically!

I am cynical because this was a policy for your son all along, you thought you had found a way to get the price down in your name and then when you get charged the CORRECT premium, you complain.

It might be your car, but in reality it is not for you it is for your son.

Sorry if you do not like my response or opinions, but if you post on a forum you have to accept that some people will not automatically take your side.

It's nothing personal....

[jojo36]

I am not taking it personally just get irritated by people like you who do not the actual story...If you actually read I said my son is the named driver and I am the additional driver.... not the other way round. Nowhere have I said that I am the policy holder!
When we helped him fill out the details it says " did you know that by adding an additional driver over the age of 25yrs it could reduce your policy by up to 20%" which is what we did. Hence the fact that he is the named driver and me the additional driver.

Besides this entire ding dong back and forth has deviated from my questions entirely, so as you cannot validate your insinuations, either answer the questions or get over your hang ups!

[rudekid48]

So it is true, arrogance and ignorance do go hand in hand..................... .....

1/ Yes they can - they provided cover and then cancelled due to non payment. You are liable for the time on risk charged based on the CORRECT premium.

2/ This question is irrelevant. They HAVE cancelled the policy. The price agreed was based on you being able to provide a 'valid' NCB, you could not.

Some Insurers / Brokers do not help themselves with questionable cancellation/administration charges, there is nothing here that points to this.

I am now going to nurse my hang ups.

[GoldyR]

Crikey! This seems to have got a bit heated!

I notice Jojo that this policy was actually set up in your son's name, with you as a 'named' driver. It seems that you only intended initially to set this up under your son's name, but when the insurer advised you that you could be entitled to a 20% discount if you added a named driver over 25, you naturely took them up on the offer...anyone would!

I think the confusion (& the arguing!) has been caused by Rudekid misconstrueing your intentions here, there is alot of interest in the insurance press at the moment around 'fronting' - 'Fronting' is basically setting up a policy in an older persons name & adding the younger person as a named driver to make the premium cheaper, even though the younger person is the main driver & more often than not, the owner of the vehicle. 'Fronting' is effectively misrepresenting the risk to the insurer, & in the event of a claim, if fronting is discovered, the claim will be thrown out & the policy cancelled. I think this is what Rudekid thought you had intended, but if he had read your initial note thoroughly, he would've realised this is not the case.

In answer to your queries, 1) Yes they can charge you to cancel the policy, the charge covers the administrative costs incurred in cancelling the contract & not doubt takes into account the time you have had on cover. 2) Yes, again they can increase the premiums to reflect the 'true risk' - however they should tell you about this before they do it. During your conversation with them, did they tell you the premium would go up? You may entitled to a sml refund of premium if they didn't tell you about it, but it probably isn't worth persuing. If you want to persue it however & are looking for a final decision, I suggest you contact the Financial Ombudsman Service, it is entirely free for the consumer & you will find their details by searching on Google.

Hope this helps.

[Rob S]

Jojo,

If the policy was to be in your son's name, with you as a named driver, then they should have set it up based on his no-claims bonus and not yours. They should have started it off at zero. As an additional driver any no claims you had would not count towards your son's policy.

I don't see no harm in you going through the insurance companies complaints procedure because cover should have been based on your son being the policyholder (which I assume was the case?).

[indebtstudent]

"Yes, again they can increase the premiums to reflect the 'true risk' - however they should tell you about this before they do it."

My concern here is that, if the customer is locked into the policy, what's to stop them saying the new polic (to reflect the risk) is a million pounds per annum?

[Darkangelsdelite]

Originally Posted by jojo36

If you actually read I said my son is the named driver and I am the additional driver.... not the other way round. Nowhere have I said that I am the policy holder!

I'm a little confused here. Whose name was the policy actually in?
From the comment above, it would appear that there are 3 drivers, the policy holder, the son as the "named driver" (i assume he means the 'Main' driver, and then jojo as the "additional driver".

In the great scheme of things, it all boils down to a classic fronted risk case (which GoldyR has already explained so i wont go into this further)

As you have now found out, you cant use the NCD on more than one policy at any one time so the NCD would have been reduced to zero (possibly with some kind of introductory discount applied) and the premium increased.

As you pay by Direct Debit, they MUST give you at least 7 days notice of an increase in your monthly payments. (under the direct debit guarantee)
I'm assuming that they would have done this verbally when they told you that you cant use the NCD and reduced it to zero and told you what the extra premium is. They would also normally send you a letter confirming the increase and revised instalment amounts.
So to answer your questions in reverse:
No you cant cancel the policy just because they have changed the premiums, they are correct to re-asses the risk and increase the premium accordingly, had the info been correct in the first place, the premium would have been given at the increased amount.

In regards to your first question, most companies will not charge you a cancellation fee if it is them that is cancelling the policy, it is only if you cancel the contract that the charge is incurred.
There will be a section in your policy booklet about this under "cancelling your policy" or something, this will explain in more detail. Or if you cant find it, if you post which company it is, i'm sure one of us here will have worked for them or will know them and would be able to provide the info.


Hope This Helps


DA

[Pat-Uk]

As mentioned above, can you please clarify 100% who the actual policy holder was and if you were simply the named driver and not (as sugested above) the main policy holder.

You may have a case that the original application was missleading or not plain english and may be able to have the policy avoided from inception date. Unless it states that the occasional or part time driver (the named driver) must not use their NCB on any other car then you shouldn't have a real problem.

It is a well known fact that a main driver/policy holder you can use NCB on one policy only, but it is hardly known that as a named driver when asked if you have any NCB you can no longer use it on your own car and policy.

What was the insurance Co ??

[indebtstudent]

"No you cant cancel the policy just because they have changed the premiums, they are correct to re-asses the risk and increase the premium accordingly, had the info been correct in the first place, the premium would have been given at the increased amount."

At first glance this makes sense BUT why must the consumer be 'locked into' this contract? You point out the premium would have been different and I agree, but (this is where we differ) the customer would likely have got other quotes etc etc.

What you are saying is that the company can charge whatever they want, eg a million pounds, and the customer must pay. Surely this cannot be correct? They can hold the customer to ransom and then levy thier lovely hefty cancellation charges if the customer does not like it. Not fair at all.

[Darkangelsdelite]

Originally Posted by indebtstudent

What you are saying is that the company can charge whatever they want, eg a million pounds, and the customer must pay. Surely this cannot be correct? They can hold the customer to ransom and then levy thier lovely hefty cancellation charges if the customer does not like it. Not fair at all.

Thats not what I'm saying at all, I'm simply pointing out that insurance, as with any contract, is all based upon exchange of information and good faith.
The Consumer gives the company the info, the company then sets the contract up based on this, on the understanding that the info is accurate. (Its called the Principle Of Utmost Good Faith)
You'll notice all insurers have the blurb when you call them advising you that failure to disclose correct facts could invalidate your policy etc etc, this is why.

If the info is found to be incorrect, then the company is within their rights to nullify the contract and either set up a new one with new terms or decline to do business at all.
In this case all the facts were not given to the insurer from day one, they only came to light later on, when this happened the insurer decided to amend the contract (by increasing the premium) based on the correct info.

The consumer has 14 days in which to cancel the policy for any reason with no penalty should he not be happy with the terms of the contract.

Remember, it was the consumer, not the insurer that breached the terms by giving false information. If the insurer had given wrong info (say for example they agreed a £100 XS and put £200 in error but this wasn't spotted until 4 months into the policy) then the insurer would have to reduce the XS to the agreed amount and override any additional premium.

Just lastly, your argument that an insurer could charge a million pounds is just silly. Yes, they can charge an additional premium for correcting any false info, but the premium has to be reasonable and in relation to the change made. If they tried to "extract the urine" then a simple complaint to the FOS or FSA would clear that up straight away.


DA

[indebtstudent]

"The consumer has 14 days in which to cancel the policy for any reason with no penalty should he not be happy with the terms of the contract."

Good info here, is this the law or just an industry standard? I noticed in the info I have for my policy it says they charge £20 if you cancel within the 14 days. Can they do this? (That's all it says about cancellation hence my thread).


"Remember, it was the consumer, not the insurer that breached the terms by giving false information. If the insurer had given wrong info (say for example they agreed a £100 XS and put £200 in error but this wasn't spotted until 4 months into the policy) then the insurer would have to reduce the XS to the agreed amount and override any additional premium. "

Is this the case? I thought it was more of an innocent misundertanding between both parties? You're the expert and I could be wrong.



"Just lastly, your argument that an insurer could charge a million pounds is just silly. Yes, they can charge an additional premium for correcting any false info, but the premium has to be reasonable and in relation to the change made. If they tried to "extract the urine" then a simple complaint to the FOS or FSA would clear that up straight away."

The million pound figure was obviously not a 100% serious comment. What I was getting at was certain insurers have certain groups of people that they don't really want to insure. It is rare for them to refuse a quote, instead they price the policy really high to reflect thier view of the risk. In this case clearly there has been a misunderstanding and what you seem to be saying is that the insurer can change the premium so long as the increase is in line with thier pricing structure. That is to say that the customer would've been quoted this amount originally if there had been no misunderstanding.

My point however is that, given this quote in the begininning the customer may well have found a cheaper quote elsewhere. (My first quote was for £2,000 and they generally offered me interest free instalments!).

In this case say the premium went up lots, and this is in line with the companies pricing structure, but the customer cannot afford the premium what happens then?

Surely what should happen is the company cancels the cover and gives a fresh quote. The customer is then free to shop around.

[indebtstudent]

Whoops posted in wrong thread.

[Darkangelsdelite]

"Good info here, is this the law or just an industry standard? I noticed in the info I have for my policy it says they charge £20 if you cancel within the 14 days. Can they do this? (That's all it says about cancellation hence my thread)"

As far as i am aware, the 14 day cooling off period is FSA regulations so should apply to all products that fall under their jurisdiction. I can only speak from experience with companies i work for, and all our brands adhere to this rule, I'm sure one of the legal experts on here can shed more light on this for me.

"Is this the case? I thought it was more of an innocent misunderstanding between both parties? You're the expert and I could be wrong"

Agreed this can sometimes be settles mutually between both parties, but if its clear one side has made a blatant error, it is down to them to correct it and make sure they correct the mistake which may mean they are "put out" to a certain extent (this applies to either the consumer or the insurer)

"In this case clearly there has been a misunderstanding and what you seem to be saying is that the insurer can change the premium so long as the increase is in line with their pricing structure.......... My point however is that, given this quote in the begininning the customer may well have found a cheaper quote elsewhere"

Again, as above, had the customer given the correct info from day one, then they would have had the correct quote from day one. Appreciate that they may well have gone elsewhere had they received the quote from the start, but i still agree that the onus is on the consumer to give the correct info.

"In this case say the premium went up lots, and this is in line with the companies pricing structure, but the customer cannot afford the premium what happens then?
Surely what should happen is the company cancels the cover and gives a fresh quote. The customer is then free to shop around."

If the customer cant afford the premium then they have the right to cancel. If the error is found out outside the 14 day cooling off period then there may be a cancellation charge.
Why should the company have to cancel a policy and then re-set up a new one (which will cost the company money in admin costs etc) just for something that isn't their fault in the first place?



DA