Hi all, Sorry if this is too long but, just posting this for my son as reference and any comments most welcome.

Son wrote his car off 3 months ago, It was full comp on an Escort worth around £2000 ( I Know, but he didnt ask my advice).

Anyhow, he was informed by insurers that the policy was then cancelled ( Due to write off). They never contacted him since, until last week with a letter stating he owed £500 odd. He spoke to someone at the Insurers and they said he should have received cheque ( Never Did) with options for continuing cover. Never got any of this, but they are now saying it was his fault etc.

So Ive sent them this letter below and will update you all on progress. If anyone has any comments or advise for my son, please post it.

Thanks

On what basis have they cancelled the policy? How much of the policy was still to run? Have they talked about a refund of the unused portion of the insurance premium?

Is there any thing in the contract which purports to allow them to keep the remainder of the premium?

Hi BF, He was paying in installments, crashed his car, they cancelled, but never got back in touch concerning the remaining policy term. He only got 1 offer, (they didnt inform him he should have had a couple of offers, but thats insurance companies for you). My son being a little naive to say the least just left it.

Thanks for this but you haven't addresed any of my questions.

Sorry BF

He had around 7 months left on policy and was paying on installments. They told him they cancelled the policy because the vehicle was a write off, ??

I think they may be confused that the car should have been reported as a write off and not cancelled the policy.

My son stopped making payments toward policy, because theyd told him in writing policy was cancelled, so I expect there to be a bit of a peeing contest here.

Im waiting for the documents through the post so I can see whats actually in the policy, so will post back with other answers.

Thanks again much appreciated

Well, I managed to write-off my car in early January (my Fault...skidded on ice). The insurance company have informed me that I HAVE to continue making payments to my policy until the end of its term. This means I am continuing to pay insurance for a car that I no longer have until May of this year. When I queried this with the company, they told me this was 'normal'.

By the way I was paid an adequate valuation amount for the car.

I think that if it is not in the T&Cs that the policy should continue, then it would not be enforceable. Even if it is in the T&Cs it would probably amount to a disproportionate penalty and therefore not enforceable.

Thanks for your prompt reply.

I have contacted the insurance company and queried this again. They repeated what I said earlier. They quoted T&Cs of my policy and said I have to settle the full amount of my policy, even though the vehicle for which it applies has been written off. They said I am still insured with them until the end of the policy term. If (when) I get a replacement car, they suggest I contact them and they will adjust the policy for the new vehicle spec.

People should take note of this when they are offered a settlement figure for a car that has been written off...they still have to pay the remainder of their motor insurance policy.

These are the small print 'catches' that the insurance companies employ to reduce THEIR risk.

I dieagree that you should be bound by this contractual term. It sounds like an unfair term to me or even like an uneforceable penalty.

I am sure that the insurance comapnies expect to get away with it because no one challenges them. It is up to you how much it is worth to you and how much trouble you want to take.

I expect that you could challenge it successfully. I expect that it is another insurance industry [problem]

Once upon a time insurance installments was unavailable you were expected to pay the full amount up front or at the least within a few weeks (of course this was when insurance was affordable) .............However after the introduction of 12 monthly installments it became necessary to include a term which allowed the insurer to collect the full premium if the policy was canceled for any reason.......... they will argue, with some justification, that they have been on risk for the full value of the vehicle, less excess &/or 3rd party liability during which time they have not collected the full premium.

In otherwords if you took out a policy & paid in full at it's outset then had an accident shortly thereafter you would not be entitled to a refund

I accept what you are saying BankFodder and did put forward all the logical arguments as to why this was not reasonable, but although the person I spoke to understood my point of view they (Hastings Direct) were still not prepared to move and stated that I was bound by the T&Cs.

How can it possibly be correct/ethical to have to pay insurance for an item that no longer exists? I really do hate insurance companies!

JonCris, I also take your point. However, recently (unfortunately) my dog passed away. I was paying pet insurance by instalments for the dog, these payments stopped immediately.

(sorry for hijacking your thread Bazaar!)

No worries Centu10n,

The more the merrier. I'm thinking along the same lines as BF (Thanks by the way). The letter has been sent, we're now awaiting their reaction to take this further.

I'll up date ASAP

Once upon a time insurance installments was unavailable you were expected to pay the full amount up front or at the least within a few weeks (of course this was when insurance was affordable) .............However after the introduction of 12 monthly installments it became necessary to include a term which allowed the insurer to collect the full premium if the policy was canceled for any reason.......... they will argue, with some justification, that they have been on risk for the full value of the vehicle, less excess &/or 3rd party liability during which time they have not collected the full premium.

 

In otherwords if you took out a policy & paid in full at it's outset then had an accident shortly thereafter you would not be entitled to a refund

This is entirely flawed reasoning. Although an insurer will argue that they are entitled to keep the full amount and even though they may be able to point to some term within their contract which may have been drafted in a way which appears to permit them to keep all of the money in the event that the policy is claimed upon or else is terminated, in fact the policy is just another product and any unused portion falls to be reimbursed pro-rata less any administrative expenses.

Joncris argument is based upon an actuarial myth that the longer the policy continues, the greater the risk for each subsequent driving day. If this really was the case then installments would be calculated so that they tended to increase towards the end of a policy. Of course, the more driving journeys which are made, the greater the possiblity that a driver will have accidents but to say that that risk is greater towards the end of a policy would be completely wrong. Not only that, it would support and argument for retruning a greater proportion of the premium if only the first part of the policy was used as it could then be argued that the insurer had only provided cover for the period of minimum risk: also nonsense.

In support of this, I would point to the insurer's own suggestion in the event that you buy a new car that they will adjust the remainder of the policy to take into account for the new spec.

By the way, don't for a moment imagine that the insurer will merely accept your reasoned argument and retrun your money.

The only action is here is a court action or the FOS. Did you know that the FOS also deal with insurance complaints? Might give him a welcome break from bank charges although he may well continue the same lukewarm approach which he uses with bank complaints.

The reason the payments remain the same is because they are spread out in equal measure. Also I'm not sure it's a myth as surely the longer your in a particular situation the greater the risk as there is greater chance you will have an accident due to more prolonged use

I'm afraid that life and probability don't work that way. What you are saying would be correct if it was a given that there was 100% chance that you were going to have an accident during your year of cover. In that case, if you had managed to have 364 days of accident free driving, then you could say with certainty that you should not go out on day 365 in order to avoid the inevitable accident that day. In fact you could even ask your insurers to pay you not to go out and in fact it would pay them to give you a sum which was even greater than the annual premium - as long as it was less than the cost of the insurance loss, it would make good economic sense to do so.

Of course, probability doesn't work that way.

If at the outset of an insured year, there was a 10% likelihood of having an accident, each accident-free day would actually reduce the likelihood of that accident happening.

If you had an accident on day 365, would you go round saying "oh, what bad luck, I nearly managed to have an entire year without an accident" - or would you tell yourself "it was madness to go out, I bought it on myself because that last day was the most dangerous day of the year as by having no accidents for 364 days I managed to compress all that risk into one very susceptible 24 hour period."

The fact is that insurance is a product like any other. If you pay up front then the insurer is in debit to you and you amortise the use of the cover against your credit balance. If there is an unspent portion then English law, in theory allows you to claw that unspent portion back.

Like most dominant industries, the insurance industry have managed to produce a certain culture which is not in the interests of the consumer to the extent that most people within the industry believe it themselves. Apparently, even some members of the legal profession have been lulled this culture also.

This culture need to be unsettled by someone with the energy and determination to do it.

BF they DO pay you to not drive in that part of the premium is dependant on your annual mileage the higher the mileage the higher the premium

Just to add my 2 cents worth...

I agree with JonCris on this one.

Before i start, i'm not a legal expert in anyway, however, i have worked in insurance for a while so i'm speaking purely on my personal understanding on how the system works and not from a legal perspective.

Also, almost all insurers will have this clause in their policy whereby if a total loss claim is made, then the full premium for the policy would need to be paid.

Insurance is all based on risk. The consumer goes to the insurer and says " i want you to insure my car against XYZ for 12 months. If any of the above events happen, i want to be put back in the same financial position i am now. The insurer will weigh up the risk (drivers age, car, convictions, postcode etc) and will offer a premium based on that risk.

The consumer then agrees those terms and enters into a 12 month contract.

If event X was to happen after say 6 months, the insurer would pay out as agreed, however, the contract would still have 6 months left to run.

The consumer would then have the option to either cancel the policy and pay up the rest of the years premium (to terminate the contract early)

or use whatever payment the insurer gave them to purchase a new vehicle and put that vehicle on risk with the insurer for the remainder of the contract.

I dont know of anyone that has disputed this in court and i cant possibly see how this could be unlawful if all insurers do it as surely someone would have picked up on this by now and taken action.

Looks like this could be an interesting debate.

D.A

i cant possibly see how this could be unlawful if all insurers do it as surely someone would have picked up on this by now and taken action.

The low mileage schemes referred to in this thread are intended primarily to segment the market and to allow a variety of different products to be sold. The logical destination for low mileage policies was the "pay-as-you drive" policy which was attempted by some insurers - especially NU and which has largely been abandoned..

The insurers would have you believe the increasing risk argument - but as I said, probablity doesn't work like that and anyway my view still remains that any terms which fetters the right to terminate a severable contract and imposes a disproportionate penalty for so-doing is very possibly unfair.

You say that this is the way the system works. I don't dispute that this is the way the system works. I also don't dispute the fact that disproportionate penalties is the way that the bank charges system works.

Of course, if the insurer is able to insist that the policy continues without the risk of a car being used, then this is a nice little earner.

The fact remains that no insurance contract actually terminates the policy because of a claim. As far as I know, all insurance policies permit the client to go and buy another car and to continue using it under the policy - with any necessary adjustments. Let me add that where a client goes on to purchase a lower risk vehicle as a replacement, the insurers will adjust downwards and refund the difference - less a very significant administration fee, of course.

It is because people are merely prepared to accept conventional belief and practice that they eventually lose sight of what their rights actually are.

If these things are not properly challenged then the supplier of goods, or services will eventually gain an adverse possession of consumers' rights.

JC will understand what I mean.

OK BF and guys, Heres an update, son has a letter back seeming to be their final response, they look like theyve got a figure of just over £100 difference now, so thats a drop of £400 odd.

My question now is whats the next move? They only made one offer, this is obviously low.

My thinking here is that we now fire a letter off recorded stating that their assessment is too low etc.

Any thoughts etc. most welcome.

Heres the text of the letter.:--

Total amount payable £747.37

Claim reference: xxxxxxxxxx

Thank you for your recent letter, I have been asked as the quality executive for the claims department to look into your concerns .

I am sorry to hear you are unhappy with our service, at admiral we aim to provide a first class service customer care and I am disappointed to find you feel otherwise. I have carefully reviewed out file and would like to begin offering my sincere apologies for any confusion or frustration we have caused. I assure you it was not our intention

Having reviewed your case I will address your issues in turn

With regards to the outstanding premium, the terms and conditions of the policy show that in the event of a total loss claim, the policy is cancelled and any outstanding premium is deducted from any settlement offerd, as we would have honoured our part of the contract by paying the claim. For us to do this 1you must then honour your part by paying the full premium

I refer you to general conditions of your policy

4- Cancelling your policy

Should your car be stolen and/or deemed to be a total loss we will cancel your policy without prior warning by writing to your last known address and we will deduct any outstanding premium owed to us from any payment to you

10-total loss of your car

If your car is a total loss your car will become our property. all cover, including the driving of other cars if applicable, is then cancelled for you and any other drivers on the policy. We will deduct any outstanding premium owed to us from any claims settlement we make to you, as we will have met our responsibilities under the policy.

Therefore any claim where the car is deemed to be a total loss, the deductions of your outstanding premium and the insurance excess would need to be taken. However , on this occasion, as the deductions are £12xx.xx , we are unable to make a payment as the retail value of your car is £11xx.xx.

Due to the severity of the damage caused to your car, under the DVLA rules for damage salvage categories , your car has been declared a category B , which means it can not be repaired and put back on the road. I understand this has been explained to you and we await your notice of destruction confirmed the car has been disposed off.

With regards to the hire car, this is no provision on your policy for this. You would only be entitled to a replacement car, from our approved repairers, in the event the car is repairable and I therefore unable to reimburse the travel cost you have incurred due to this claim.

I am sorry you have found it necessary to complain, as at admiral we take customer satisfaction seriously. While I relise you remain disappointed, I hope I have explain the reasons for our action. Should you remain dissatisfied, you are free to contact the financial ombudsman service within 6 months of the date of this, my final decision letter.

Name of person whom sent the letter:

This is interesting and for me it throws the basis of the insurance policy in an entirely new light.

They seem to be saying that the insurance exists not to cover a risk from day to day until the expiry of the policy - I suppose that it it partly that, but it is rather to pay for the occurrence of a particular event - an accident which then activates their responsibilities under the contract.

Of course, this is really just looking at the same thing from a different point of view but technically from a legal point of view it is very different.

The liability to pay for the damaged car is a collateral contract.

I think that I have to change my original opinion and to say that on this basis they would be entitled to cancel the remainder of the policy and to require payment of the whole premium.

I'm sorry for misleading you up to this moment.

I suppose that the only thing to do now is to decide whether their write-off value is reasonable

Well it seems you have had a good measure of success if all it's costing is a reduction in payment of £100 which IMHO is not worth fighting as apposed to £500 which IMHO is......... My advice is accept

Thanks for the advise guys, but I'm thinking one more shot across the bows, to see what happens. Obviously this was a supposed final response, but my feeling is that someone has to try and clarify this with them. Their first offer is too low.

They are basically stating that they only insure one occurrence. Then there would need to be another policy raised if you were to continue with the insurance policy term. This doesnt make sense and I think a try at refuting some terms as being unfair may be of use.

I'll compose a letter for the weekend and send off. I'll let you know how it goes.

I really wouldn't waste your time contacting admiral again. They have followed the correct process (as i explained in my last post)

and have now issued you with their final decision. Writing to them again wouldn't change this in this slightest.

As the letter states, your next step from here would be to contact the FOS. In all honesty though, i cant see them getting involved as admiral haven't done anything wrong.

My advice? Take the offer and chalk it up to experience.

DA

Thanks Guys, I'll look through sons policy next week, then decide. If I write to Ombudsman, I'll put in no uncertain terms of their apparent toothlessness to see if it'll gee em up.