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Car insurance cancellation when policy is no longer suitable

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Ok guys, I'm just starting to get my teeth into this on behalf of my step-daughter and would welcome any suggestions.

 

Early last year we bought her a car to learn to drive in, which she insured in her own name as a learner driver. She renewed the policy on 28th March this year, paying by monthly DD, then passed her test in May. Because of the test pass the learner-specific policy no longer offered any cover so she cancelled the policy on 21st May.

 

They now require a cancellation fee of £35 (willing to pay) and an additional £91.29 premium for short term rates (no so willing!).

 

Obviously, the short term rate conversion is to protect them against people taking a 12 month policy then cancelling in order to get cheap short-term cover but, in the case of a learner-specific policy where the driver passed their test (thus invalidating the cover) this seems to be an unreasonable term. Would it not be reasonable to expect an underwriter to incorporate the fact that many learner policies will end in this way into the original premium?


:!:Nothing I post should be taken as legal advice. It is offered as an opinion only.:!:

 

This warning is in my signature because I'm not organised enough to remember to type

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What you can do is submit a complaint about the short terms rates issue on cancellation of the policy mid term. Ask for a breakdown of the cancellation charges calculation, together with an explanation of the policy terms and conditions that allow these charges.

 

Under FSA rules, they have to provide the breakdown and explanation on request, so they should do this.

 

See what happens. If the policy t&c's allow these charges, then pay up. If the policy does not and the explanation is not satisfactory, then continue the complaint, threatening to go to the FOS.


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Surely, even if the policy allows the short-rate conversion, it amounts to an unfair term under the The Unfair Terms in Consumer Contracts Regulations 1999?

 

S.6 of the Regulations proivides that

 

"...the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract..."

 

In this case, the service was insurance specifically applicable to a provisional licence holder, where it is reasonable to expect that many such people will cease to be covered during the term of a policy. All the circumstances include (a) the policy is no longer applicable due to a foreseable (by the insurer) event and (b) there has been no claim, so the period on cover has a factual, established, risk of zero. This is entirely different to taking a short-term policy where the rates are higher to reflect an increased risk.

 

From the (inexhaustive) list of terms that may be unfair at Schedule 2 to the Act, the following would seem to closely approximate the imposition of this "conversion":

 

(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;

Fairly self-explanatory

 

(l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded;

This term allows the insurer to vary the price of the service already provided to "short term rates", without any way for the consumer to know what those rates are, and (obviously) without an option for the consumer to cancel the contract when the revised rates are applied

 

 

 

And (possibly):

 

(f) authorising the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract;

 

Although I need to get the contract itself off her to check that it includes the normal right of the insurer to cancel mid-term.


:!:Nothing I post should be taken as legal advice. It is offered as an opinion only.:!:

 

This warning is in my signature because I'm not organised enough to remember to type

it in every post.

 

And you're considering trusting me????:eek:

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This could be a good case to take to the FOS, but you would need to register a complaint first with the Insurers, to give them the opportunity to review the matter. Being that they would get charged a £500 case fee by the FOS, if they thought that you would take your complaint that far, there is a good chance they would waive these charges.

 

The point you are making that once someone passes their test the cover becomes invalid, so the policy is in effect cancelled by Insurers is a good one. Normally if Insurers are cancelling a policy, they would only be able to charge the pro-rate amount i.e. no cancellation charge or short term rates.


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Ok, two letters have now been sent (recorded delivery) and I'm awaiting a response. In the spirit of sharing, this is what's been said.

 

First, to the debt collectors, which should be a pretty cut & dried way to get them off step-daughter's back:

 

Dear Mr xxxxxxx,

I have been asked to write to you by Miss xxxxxxx in relation to the above reference. I enclose notice from Miss xxxxxxx that I am authorised by her to correspond on this matter.

 

Miss xxxxxxx wrote to xxxxxx Insurance on 8th July 2010 disputing the alleged amount outstanding following cancellation of her insurance policy. She has received no reply or acknowledgement from xxxxxx Insurance about this dispute so it would appear that they have forwarded the case to your company without considering a valid dispute.

 

The Office of Fair Trading Debt Collection Guidance, at Item 2.6(h), gives the following as a specific example of unfair business practice:

 

Ignoring and/or disregarding claims that debts have been settled or are disputed and continuing to make unjustified demands for payment

On behalf of Miss xxxxxxxx I therefore request that you immediately return the case to xxxxxx Insurance, in accordance with the above guidance, until such time as they have dealt with Miss xxxxxx's representations.

Yours sincerely,

 

 

 

Spunkymonkey

The insurers have been sent a copy of that, for info, and the following basis for disputing the charges. Note that even the cancellation fee might be challengeable but she's willing to pay that as a goodwill gesture at the moment:

 

 

Dear Mr xxxx,

 

Policy Number xxxxx: Miss xxxxxxxxx

 

Miss xxxxxxx has asked me to contact you regarding the alleged balance outstanding on the above policy. Enclosed is authorisation from Miss xxxxxxx for me to correspond on her behalf in this matter.

Miss xxxxxxx wrote to you on 8th July 2010 disputing the outstanding balance. The only correspondence she has received since then was a reminder for payment dated 15th July 2010. This included advice that, if she had already contacted you regarding the balance, she should ignore the letter. She naturally assumed that this advice applied since she had written to you a few days before the reminder was generated.

Since then she has received no further correspondence from you but has been contacted by xxxxxx debt collection agency requiring payment of the disputed amount. Xxxxxx have been informed today that the alleged debt is in dispute and that they should refer the matter back to you until the dispute is resolved.

The balance outstanding is comprised of two separate amounts: a cancellation fee of £35.00 , as detailed in the policy contract, and a conversion to “short term rates” of £91.29. There is also a credit for premiums already paid of £5.24. At this time, Miss xxxxx is limiting her dispute to the short-term conversion charge.

Although provisions for this are included in the contract of insurance, in consideration of the whole facts, the inclusion amounts to an unfair term under the Unfair Terms in Consumer Contracts Regulations 1999 because it “[...]causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer” when applied in relation to a contract for learner insurance.

It is in the nature of the service provided that such insurance is likely to become invalid during the length of the contract if the consumer passes their driving test so, applying what amounts to a penalty on cancellation in that particular circumstance creates a significant imbalance to the benefit of the insurer.

Even the cancellation charge could well be construed as an unfair penalty when applied to cancellation for the reason of a learner gaining a full licence. If Miss xxxxxx were to try and continue the contract, having gained her full licence, then you would apply a large increase in price of the insurance and both the OFT and FSA have been quite clear that a price increase during the term of a contract is likely to be unfair in most cases unless accompanied by a right for the consumer to cancel without penalty.

Notwithstanding the last paragraph, Miss xxxxxx is willing to meet the balance of the cancellation charge, after deduction of the credit for premiums paid, as a token of good faith if you agree to accept this payment as full and final settlement of the matter. I look forward to receiving confirmation from you, when I shall arrange for Miss xxxxx to make payment of £29.76 in settlement.

 

Yours sincerely,

 

Spunkymonkey

I'll keep the forum up-to-date as soon as I get a response ;)

:!:Nothing I post should be taken as legal advice. It is offered as an opinion only.:!:

 

This warning is in my signature because I'm not organised enough to remember to type

it in every post.

 

And you're considering trusting me????:eek:

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Finally got a response to this. After two pages of explaining and justifying their position, they say:

 

As a gesture of goodwill I have today waived the short period rates of £91.29 and have notified the relevent department concerned. I can confirm that a cancellation fee of £29.76 remains outstanding.

 

So seems like, as a "goodwill gesture", they agree with my analysis of the situation :p


:!:Nothing I post should be taken as legal advice. It is offered as an opinion only.:!:

 

This warning is in my signature because I'm not organised enough to remember to type

it in every post.

 

And you're considering trusting me????:eek:

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