Hi

Looking for some advice if possible please everybody! Ive been insured with Tesco car insurance for 6 years and today i rang up to cancel my policy. They told me that i would have to pay £145 to cancel it as my renewal date was 26th may and being outside the cooling off period i have to pay fees for things like breakdown,legal fees etc and also £30 cancellation charge!!

Can anyone tell me if this is allowed and if theres anyway around paying this scandalous amount!!??

Thanks

Hi maz

Welcome to CAG

The guys will be happy to advise as soon as they are available.

Thread moved.

Can anyone tell me if this is allowed

Yes

and if theres anyway around paying this scandalous amount!!??

No, you agreed to the T&Cs and they're not illegal/unfair.

Why are you cancelling now when you've only just renewed?

I pressume you are paying monthly, but you have taken out a years policy; so if you had paid it all up front and wanted to cancel you would expect a refund!

now because the policy has only been in existance for about one month, they would charge this at a higher short term rate which is normally 30-35% of the annual rate/month.

The cancellation rates would be in the T & C anyway.

I pressume you are paying monthly, but you have taken out a years policy; so if you had paid it all up front and wanted to cancel you would expect a refund!

now because the policy has only been in existance for about one month, they would charge this at a higher short term rate which is normally 30-35% of the annual rate/month.

The cancellation rates would be in the T & C anyway.

So how does a one month or twelve months contract make the same individual a higher risk? Just another bloody insurance con.

It doesnt, its just that for a shorter term the rates are higher.

It should be all in the terms and conditions that you sign up to!

Nobody is forcing the op to cancel! choice and thats the contract.

Some Insurers do increase their premiums for monthly payers. They way they explain this, is that they offer a discount to annual premium payers and if you change to monthly, you lose this discount and pay interest for the monthly option. This is fairly common, but not all Insurers do this. Tesco I believe are one company that do so.

If you read some of the FOS rulings on this cancellation issue, actually you will see that they have said that some cancellation rates are too high and have said that a time on risk should be charged, plus a maximum of £50 for a cancellation admin fee. So if you are unhappy with the way in which a cancellation was handled, you can complain and ask the FOS to take a look at it.

Also as some sompanies act as a broker, and effectively pay the year up (swinton springs to mind) if you cancel they try to cover their costs.

Why is OP cancelling just into contract year? if its to go to another insurer, why wasnt this done at renewal.

Hi, I've had the same happen to me. Plus I purchased online and I've checked through everything and there is no mention of short term rates, ergo I did not agree or enter into a contract regarding short term rates. Probably this guy has found a cheaper insurer a month after automatically renewing.

There's been some misinformation in this thread. I'll try to clarify.

There is no such thing as short term rates. This is a complete misnomer. The insurance policies you are talking about is for annual cover. There are seperate and distinct short term policies, and they will have their own pricing structures.

When you purchase your insurance policy and select to pay monthly you are not paying for the insurance policy month by month. What happens is that you take out a loan to cover the full annual payment. Then the monthly bill that you pay is the repayment of that loan. This is why you are charged interest on monthly payment methods - sometimes as much as 30% APR or more.

Additionally insurers will look at the risk cost to charge a premium they feel is indicative to your risk. There is statistical evidence to show a correlation between people who select a monthly payment option and a higer risk of claiming. Nobody knows exactly why this correlation occurs. Therefore insurers would, if they could, charge a higher premium for people who would want to pay monthly. However you don't select your payment method until after you are given a quote so it is not possible to change the price at this stage. Therefore some insurers display both prices, with a "discount" offered for annual payment.

If you can afford it then taking out an annual payment option could reduce the amount you pay. It could be better to take out a personal loan with a lower APR from another company than pay the generally high APR fees associated with the monthly payment selection.

That all said you have purchased annual cover. Think of it another way - if you rented out a room in your house to someone, and you both agreed that the person would live there for a year, and you both signed a contract agreeing that you would rent this room for one year then how would you feel if that person moved out after just 2 months? They have broken the contract you both agreed to.

In order to give some flexibility insurance companies do allow customers to cancel a policy, and will return the pro-rata risk premium. They do however have a cancellation fee. This is not an administrative charge in the same way that banks have fees for you going over your overdraft fee (etc), but a contract penalty for your early exit.

Once area where you may have cause for complaint however is that these fees are often not clearly marked out in the terms and conditions of the policy. They should be clearly stated up front before purchase, as they are a major facet of the contract. Check through the pre-sales information to ensure that the cancellation fees were clearly provided to you prior to purchase (and not just in the information sent to you after you had bought the policy). If they are not there then raise a complaint on the issue of TCF - that a major contract clause was not explained to you before entering the contract. If they are present then I'm afraid that you have agreed to those conditions and you have no choice but to pay the cancellation fee.

Although it won't prevent you from having to pay, you are also entitled to complain if you feel that the cancellation fee is excessive. You should do this to the company first, and if you do not receive a satisfactory answer then you can refer the matter to the FOS once all options with your insurer has been exhausted. It is also worth writing to the ABI about your concern over rising costs of cancellation fees in the insurance sector.