Consumers have been urged to contest rising fees levied by insurers for policy changes that can add up to £110 a go.
Critics question whether it costs that much to cover the outlay for a few minutes of an employee's time to press a few buttons and send the paperwork (see the Cheap Car Insurance and Cheap Home Insurance guides).
The Financial Ombudsman Service, the independent complaints arbitrator, says charges must reflect the true administrative cost, while there have been reports of MoneySavers successfully challenging such fees.
Research by data provider Defaqto shows the typical cost of cancelling a motor insurance policy has risen from £31 in 2005 to £37 today, while the percentage of firms charging has also risen from 50% to 70% in that time.
Yet some providers charge much more. Echoice.com, part of insurance giant RSA, charges up to £110 to cancel, Igo4insurance charges up to £85 and More Than charges up to £55.
In contrast, insurers Churchill and Direct Line issue a £26.25 fee. This will usually be deducted from any refund for unused cover.
Meanwhile, average fees to amend a motor policy, such as changing address, have risen from £15 in 2005 to £18 today, Defaqto adds.
The percentage of firms charging this fee has risen from 48% to 67% in that time. This is in addition to any increase in the premium due to a change of circumstances.
Broker XS Direct Insurance charges up to £40 to make an amendment. In contrast, insurers Your Cover Insurance, part of the Allianz group, and Zurich don't charge.
Consumer lobby group Which? says one in three home insurance providers charge administration fees for changing details such as marital status or address.
Not only can fees be high but they can be difficult to find as they are often dug deep in the small print.
Which? chief executive Peter Vicary-Smith says: "Whatever the fee, insurance companies are going to have a hard time trying to justify the exorbitant charges they're billing for routine tasks.
"It's about time they start treating customers fairly and make administrative charges proportionate and transparent."
Challenge the fee
Some insurers will refund a charge when you ask. One MoneySaver, who has asked to remain anonymous, has avoided four admin charges from insurer Admiral over the past few years simply by asking.
Wendy Alcock, MoneySavingExpert.com money analyst, says: "If you feel the cost of your insurance charges are excessive there's no harm trying to avoid them or asking for a refund afterwards as this tactic has proved successful at times."
Mike Powell, from Defaqto, says: "It is worth asking not to pay the fee but that will be down to the discression of the insurer. If you have been with it for a while it may withdraw the charge."
The Financial Ombudsman Service says administration and cancellation fees have to reflect the cost to firms, though it won't state a suggested charge as it says all firms have different costs.
On cancellations, it adds: "Giving consumers the right to cancel and then penalising them financially for exercising that right is likely to be unenforceable in law, as well as unfair and unreasonable."
While campaigners say the public should ask not to pay, insurers point out their administration expense in cancelling a policy, in particular, is far higher than costs for changes in other sectors such as the credit card industry.
Fair fee level
In the credit card sector, fees for late payments and exceeding your limit have been set at £12 since 2006 on guidance from the Office of Fair Trading, which believes anything higher may represent a disproportionate charge (see the Reclaim Credit Card Charges guide).
While insurance fees are often much higher than this, the situation can be more complex.
When cancelling a policy, Churchill and Direct Line explain that insurance companies do not just charge for the administration of shutting down an account but also to make up for the loss of the customer given they have spent money acquiring that person in the first place.
The pair say their costs can be covered with a £26.25 cancellation fee, yet others charge over four times more.
Of firms that charge for making amendments, only a handful, such as Saga, at £10, charge less than £12.
The problem has been a common source of ire on our forum but opinion is divided.
While some are angry with what are perceived as high charges by insurers, one of our most knowledgeable regular contributors dunstonh says: "The actual pressing of the buttons does not cost much. However, the facilities to allow those buttons to be pressed do."
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