Loyal customers face extra fees of up to £50 a year as a result of sticking with their existing insurance company, a MoneySavingExpert.com investigation reveals – with firms such as Budget, Hastings, Saga and Swinton among those to add on 'admin fees' at renewal.
We've long warned that auto-renewing usually means you'll massively overpay, but now we've identified at least nine companies that charge an extra fee on top of your usual car or home insurance premium – an extra cost simply for the privilege of keeping your business with them.
Whether or not your provider charges a renewal fee, you should NEVER automatically stick with the same firm, as the best deals are often for new customers – see full help on how to cut costs in our Cheap Car Insurance and Cheap Home Insurance guides.
Which insurance companies charge renewal fees and how much are they?
We approached around 20 major insurers and brokers to ask if they charged an admin fee simply for renewing your car or home insurance policy. Nine told us they did, with the fees costing up to £50, for those who bought their car insurance from Budget.
Here's the list in full:
|Car insurance||Home insurance|
|Auto Direct (owned by Ageas)||£25||N/A|
|Bluefin (owned by Axa)||£27.50-£35||£27.50-£35|
|Direct Choice (owned by Saga)||£10||N/A|
|Kwik Fit Financial Services (owned by Ageas)||£35 (for instalment customers)||£35 (for instalment customers)|
|Towergate||£10 (for classic cars)||£31.50 (for non-standard properties)|
|* Budget and Hastings say this is an admin fee also charged to new customers starting a policy|
These fees are in addition to the premium you pay, which can often be significantly more if you're renewing, as the best prices are usually for new customers.
One other company – First Central – told us it charged a £50 admin fee to renew a car insurance policy. However, it guarantees that renewal premiums will be cheaper than new policies on a like-for-like basis – something the other companies listed above were unable to promise – so with First Central, while you may pay more for renewal, you definitely won't pay more twice over.
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How many customers are affected?
Millions are likely to face these extra admin fees if they renew, though it's impossible to get precise figures.
According to its most recent annual financial accounts (for 2014), Swinton had a total of 2.2 million policyholders on its books, while Saga and Hastings are understood to also have at least two million customers each. Kwik Fit reportedly has more than a million. While we don't know exactly how many of those customers have car or home insurance policies, they are the two most common types of insurance.
And while none of the three biggest firms on the list (Hastings, Swinton and Saga) would tell us what proportion of their customer base auto-renews, a well-placed industry expert at a different insurance company told us that a 40% auto-renewal rate was typical for car and home insurance customers across the market.
'A double whammy'
Guy Anker, managing editor of MSE, says: "Auto-renewal is often a rip-off, and this investigation shows those who do it often face a double whammy, with extra renewal fees making it even worse.
"This once again proves what we've long said – you should simply never auto-renew, but look around to find the best overall deal instead." See our Car Insurance Cost Cutting System to get the best prices.
What if they're asking for a renewal fee? Can I escape it?
While you really shouldn't be auto-renewing, if you absolutely must stick with your existing insurance company and have spotted an itemised admin charge on a renewal notice, you've nothing to lose by calling up to haggle to get the fee removed.
We spoke to one disgruntled home insurance customer who noticed they'd been billed £35 by Bluefin simply to renew an annual policy. When they called up to complain the firm quickly agreed to drop the fee from the overall renewal price.
However, renewal fees aren't always itemised in a renewal notice – so it might be worth contacting your insurance company to ask exactly how much it's charging you (if at all) to renew.
What if I've already been charged? Can I reclaim it?
Admin fees need to be proportionate to the work involved.
If you believe your fee was excessive, you'll first need to complain to the firm that issued it. If you get a firm rejection or no response within eight weeks, you can take the matter to the independent Financial Ombudsman Service, which adjudicates between consumers and financial firms.
An ombudsman spokesperson told us: "We do receive complaints about policies renewing automatically and fees being charged. Usually the consumer will complain that they weren't aware the policy would auto-renew. So we'll check to see what happened.
"Although we can't tell an insurer at what level to set their fees, we can check to see whether a renewal fee seems excessive in the circumstances."
So how exactly do these insurance companies justify charging renewal fees?
A Saga spokesperson told us that its £20 renewal fee was previously included within the overall price of a policy. The firm says around 20% of its motor insurance customers pay less at renewal even without new business discounts.
A spokesperson for Hastings said the fee it charges is an "arrangement fee" which is also charged to new customers when they first take out a policy. Budget also told us that its "administration fee" of £50 is for new and existing car insurance customers and says the fee is included within the overall price quoted.
None of the nine companies listed in the table above could guarantee that, aside from the renewal fee, existing customers wouldn't pay more for their premiums than new customers on a like-for-like basis.