Hi

I took out a car insurance policy with a brokers last month, I looked at various policies and took out one that accepted direct debit payments even though this policy was more expensive than others. I paid a 20% deposit with my card.

I have received a letter today from the insurance company saying that they will not accept direct debit payments off me and demanding the full amount of the policy or it would be cancelled and I would lose my full 20% deposit.

Are they allowed to do this ? What contract have I entered in to. Firstly, is the broker allowed to sell me a policy and take a 20% deposit off me before checking if this policy is eligible for direct debits ?

Secondly, do I have to pay cancellation charges on the policy for non payment, as the letter of the insurance states even though I was sold this policy as a direct debit scheme in the first instance ?

Thanks for any help

Have they said why they won't accept DD payments - and what does your broker say?

This sounds highly unusual, and bang out of order. You really need to complain to your broker, and pay no cancellation fees. Let us know if there is still a problem

I had a similar situation, http://www.consumeractiongroup.co.uk/forum/insurance-assurance-companies/45136-no-claims-bonus.html.

I think your first priority is to get insurance sorted out. If your broker cant find you a satisfactory solution ask them to send your proof of no claims and go elsewhere. Then complain to your broker, the letter I wrote is pasted below, it is a different situation but notice how I used the words 'the policy you mis-sold me'

I hope they cave in as easy as my broker did

GOOD LUCK

13th November 2006

Dear Sir/Madam

POLICY NUMBER: ********

Further to recent telephone conversations following a sudden unannounced increase in my direct debit charges, I feel completely let down by your Company and I am very disappointed with your resolution to this matter.

When I bought my new van I was informed by you that you could not insure it under our existing policy as the new van was registered in my name and the insurance was in my wife’s name. We were advised by yourselves to cancel her policy and for her to relinquish her no claims bonus to me, so I could benefit from the 9 years we had built up (I have been a named driver on her policy for the whole nine years). I took your advice in good faith and agreed to pay a premium of £331.51 for the new policy, I paid £100.36 deposit and agreed to pay 9 instalments of £29.21 making a total of £363.25 for the year. My wife faxed her letter of cancellation (with agreement to relinquish her no claims bonus) to you on 6th September @ 20:51, this was duly actioned. You wrote to me saying that you had not received the proof of no claims and my policy premium would be increased, I called you and said that this had been done and was asked to fax it again. I faxed the letter again on 15th October @ 20:45 and heard nothing from you so assumed all was OK. On 1st November I logged on to internet banking to find that you had taken £51.35 from my account that day, therefore, you had ignored the fax I RE-SENT and worst of all you didn’t even let me know. I called you that day and was asked to fax the letter once again. I did this and received a call that afternoon only to be told that the insurance company that you recommended was no good and would not accept this as proof of no claims as you said it would.

As I stated earlier, I am very disappointed with your resolution to this matter. You offered to cancel the policy you mis-sold me, minus the £180.92 I have already paid for the 68 days I have been insured, and sell me a new policy at £333.00 (with a massive £500 excess), this would make a total of over £512 for 14 months. No Thanks I have been quoted £210.00 elsewhere (with only £250 excess).

I have not cancelled my policy yet as I am hoping you will offer a reasonable resolution to this matter, other than trying to make me pay extortionate amounts to cover up YOUR error.

I look forward to your reply.

Yours faithfully,

They can't cancel their policy & hang onto your money.

Did you give consent for a CRA search as I suspect they have refused to accept your DD's because of the mess the money lenders have made of your credit rating

They can't cancel their policy & hang onto your money.

But surely a motor insurance company, or any other insurance company, is quite entitled to charge for 'time on risk' (i.e. the time over which they held the insurance risk) in the event of a cancellation by either party?

If that's not the case then everyone would be having free insurance by taking out a policy, paying a deposit, cancelling it and then getting the deposit refunded!

From personal experience I can also say that, generally speaking, 'time on risk' premiums are greater than the "annual premium divided by the 'time on risk'" might suggest they would be.

But 'THEY' didn't cancel the policy the insurance company did which is a whole different ball game.

Hi,

How it works is you actually get a loan, which is then paid to said insurance company. You pay the loan company and not the insurance company. your insurance is believe it or not on HP to you hence the loan company being able to cancel the policy through non payment. This brings out a whole can of worms though as how can you actually cancel a policy that's paid in full?

Right, They can charge you for time on risk and cancel your policy. However, what you need to know is if they are voiding your policy from inception, or issuing you with a 14 day cancellation letter. If the latter, then you will have to pay for the time.

If it is cancelled from inception, then you should get your money back.

Regarding HP - not too sure what you are saying. The Insurance Company will get the monthly payments, there is no Third Party Loan involved.

Again, go to the Brokers complain that they have mis sold a policy, as you asked for a monthly payment policy, and they have failed to adhere to your request. It might also be worth complaining to the FSA, they will chase the Brokers too.

Most brokers finance the policies through Premuim Finance. At the outset they get paid in full less fees & interest. The policy holder then pays Premuim Credit

Most brokers finance the policies through Premuim Finance. At the outset they get paid in full less fees & interest. The policy holder then pays Premuim Credit

Exactly, so how do they get away with cancelling a policy paid in full?

Do you mean at it's inception. If so you ain't using credit & if not you don't complete monthly payments until very near the end of the policy.

Which ever way you pay they can decide the 'time on risk' & either keep a portion of the money paid in full or if on HP a further contribution to cover the risk.

Heads you lose Tails they win

the brokers are in breach on this issue..they have quoted to supply you insurance on payment terms specified in writing and have failed to honour that pledge. they have accepted your deposit on those terms and put the insurance in force.

it is the brokers responsibility to amend the problem. if the insurers do cancel your policy i have no doubt you have redress on the brokers as it is they who dictated the terms of payment with you whilst acting as an agent on behalf of third parties.

get on to the brokers and create a stink. they have made this problem let them sort it out so you do not loose out ..it may also pay you to contact the insurers directly and inform them of what has happened.

if you do have to pay for insurance used make sure that its only amounting to the true cost of the total years price divided by the amount of days used, do not let them charge you cancellation fee rates which are a hell of a lot more.

good luck...007

They will charge an amount based on not only 'Time on Risk' but also because they were 'At Risk' the latter of which will have no bearing the number of days or months.

The reason being that whilst they where 'At Risk' they where on risk to the full extent of the cover even if the policy was only part paid at the time of any loss.

In other words pay your deposit & have an accident the next hour,day & your covered