The hidden charges found in car insurance policies have soared in the last five years, with nearly half including a ‘set-up’ fee of as much as £60.
Some 44 per cent of policies now have a set-up fee, up from 14 per cent in 2016, according to the financial information service Defaqto.
These fees will be charged by your insurer when you start a new policy. They have been affecting many drivers who recently changed their vehicles.
The cost of car insurance has risen dramatically in recent years, with almost half of all policies including a set up fee
Whilst 86 per cent of people were not charged set-up fees in 2016, 10 per cent are now charged £60 or more.
It is not only those who take out new policies that should be aware of fees.
Drivers renewing their auto insurance may be subject to a renewal fee if they remain with the same provider.
These fees were charged by only 9 percent for products in 2016. However, recent analyses show that they have risen to 44% of providers.
More than a quarter of insurers charge between £20 and £39.99 to renew a policy, while 8 per cent are charging £60 or more.
There may be fees for those who choose to end their insurance coverage after the permitted 14-day cooling off period.
| 2016 | 2021 | |
|---|---|---|
| There is no charge | 86% | 56% |
| Less than £20 | 2% | 1% |
| £20 – £39.99 | 6% | 25% |
| £40 – £59.99 | 2% | 8% |
| £60 or more | 4% | 10% |
| TOTAL | 100% | 100% |
| Source: Defaqto | ||
Some 51 per cent of products now charge a fee for cancelling within this period, which can be as much as £60 or even more.
In the event that customers have to modify their insurance policy for any reason, adjustment fees could also apply. Change the name, or add another driver.
Fees vary but they could be as high as £35, according to Which?, and this is on top of any increase in premiums caused by the changes.
| 2016 | 2021 | |
|---|---|---|
| There is no charge | 91% | 57% |
| Less than £20 | 1% | 1% |
| £20 – £39.99 | 6% | 26% |
| £40 – £59.99 | 2% | 8% |
| £60 or more | 0% | 8% |
| TOTAL | 100% | 100% |
| Source: Defaqto | ||
Mike Powell is a Defaqto expert on car insurance and stated that many UK residents are looking to buy new vehicles this year, but they could be caught with higher costs.
“When price comparisons sites are more popular, many customers look for the best deal without reading through the fees.
Consider carefully what charges you will be subject to when selecting a policy.
“This is the part that will take the longest time, but could also be the most crucial.
| 2016 | 2021 | |
|---|---|---|
| There is no charge for this service | 3% | 0.50% |
| There is no charge | 47% | 48.50% |
| Less than £25 | 9% | 6% |
| £25 – £39.99 | 33% | 37% |
| £40 – £59.99 | 5% | 5% |
| £60 or more | 3% | 3% |
| TOTAL | 100% | 100% |
| Source: Defaqto |
Top Tips from Defaqto for determining the cost of car insurance.
1. Most insurance companies have a document called the ‘Terms of Business’. This will include all fees applicable to your policy. Before you purchase insurance, make sure to review this document.
2. This information could be found in the policy documents or online by the provider of insurance. To ensure you are aware of the fees, make sure to check out the policy fees.
3. You can ask a person to verify the fees and provide the necessary documentation if you are unable to find it.
This data came from Defaqto’s Matrix Database, 6/12/12. This data refers only to comprehensive, standard car insurance, and excludes High Net Worth or Telematic products.