I recently cancelled my car insurance policy with the Norwich Union which Ihad been with for a number of years.On cancellation I received a letter indicating that I was due £46 whichincluded a cancellation charge. Since I pay DD monthly, the amountpresumably just covers the charge.I spoke to a consumer advice helpline which said I would be best paying thecharge as I could be held accountable to the balance for the rest of theyear (since car insurance policies cover a 12 month period).I do not have any documentation that indicates cancellation charges but Iknow that's no excuse, however I hoped I may get advice either confirming ordiscarding my previous advice.Subsequently, I received this email from the company:"Thank you for your email regarding outstanding payment on your policy.

Please note that when a policyholder initiates cancellation of the policy at any point of time in a period of insurance, then the policyholder has to pay for the days he/she has been covered including the administration charges of £52.50 as applicable for cancellation.

So I would like to inform you that you are required to pay the premium for the days you were covered on the policy from your last renewal date 14 November 2007 until 01 February 2008 including the administration charges of £52.50 as applicable for cancellation.

However I would be unable to provide you the break up for the cost. You need to call our customer services" Basically am I legally obliged to pay this?

Can you please explain the reason for which you are cancelling the policy? The reason I ask is because there are circumstances when the fee should be applied, and circumstances where it shouldn't.

For example, if you sold the insured vehicle, and say for argument's sake you replaced it with a high-performance vehicle which NU aren't willing to insure, then you shouldn't be charged the cancellation fee. However, if you sold the vehicle and haven't yet replaced it, then the fee would apply. These are just 2 examples - there are many others. If you explain the reason for cancellation, then we will be able to advise you.

In any case, the cancellation charge should be mentioned in the policy booklet, or in the renewal documents.

I cancelled the policy because I found a cheaper policy but I didn't say why I had cancelled the policy.

If I decided to sell my car and use public transport would that mean I was still tied in to a policy for the rest of the 12 month period?

If I lost a limb and couldn't drive would I still be tied in to the same policy?

The bottom line is "am I legally bound to pay a cancellation charge"?

Is a cancellation charge a penalty charge?

I sent an email request asking what the charge covers and a breakdown of the cancellation charge but the response was that I was required to phone a number. If I have sent a request in writing are they not obliged to supply the information in writing? Why should I have to phone?

The only documentation I have is the insurance certificate (I might not have even received a renewal. I'd been with them for quite a number of years).

thanks

I cancelled the policy because I found a cheaper policy but I didn't say why I had cancelled the policy.

 

If I decided to sell my car and use public transport would that mean I was still tied in to a policy for the rest of the 12 month period?

In those 2 circumstances, you would be required to pay the fee.

If I lost a limb and couldn't drive would I still be tied in to the same policy?

I don't think so, in this case. However, if that were to happen, you would most likely have to send medical evidence to the insurer and they would (hopefully) waive the fee.

But in your case, you have cancelled the policy because you found one elsewhere with a lower premium. What you need to consider is: How long do you have left until the renewal date? If it's only a couple of months or so, you may as well carry on with the existing policy. However I can see in your case, you would have had another 9 months to go anyway.

Also you need to consider: How much less does the new policy cost? Does it provide cover which is at least equivalent to or better than the one you are cancelling? I'm sure you would already have considered these things, but I just thought I'd mention it for the benefit of anyone else who might read this topic in future. Once you factor in the cancellation fee, you might find you would have been better off to carry on with your existing policy until the renewal date. Then you could always find another policy to start from your renewal date, and you wouldn't have to pay the cancellation fee.

The cancellation fees are only applicable if you cancel the policy mid-term, not if you lapse the policy at the renewal date. This is standard practice for motor insurance policies. The FSA rules say that insurers are not allowed to charge anything that could be classed as a penalty. So, if you believe the charge is a penalty and you are not given any evidence to the contrary, then you could dispute it in that way.

I'm not too sure why they are insisting you phone to obtain the information.

Another thing to consider is: who is underwriting your new policy? If you took out the new policy via an intermediary, you might find that it is underwritten by NU anyway. Also, several banks have their policies underwritten by NU. If you check the terms and conditions of your new policy and you find it is underwritten by NU, then you won't have to pay the cancellation fee as you would still effectively be with the company, but just under a different policy number and a different sales route.

Thanks. You have been very helpful.

Much appreciated.