Insurers under fire over cost of policy changes

INSURERS face a new threat to their profits after Which launched a campaign against the fees charged on car and home policies.

The industry, parts of which paid out large sums last year following a string of natural disasters around the world, stands accused of charging “exorbitant fees” for simple changes to policies.

Consumer group Which said Axa and subsidiary Swiftcover charge a flat £30 fee for policyholders to change their address, surname or vehicle.

Customers also face charges for renewal and up to £75 to cancel a car insurance policy, according to the study of 39 car insurers and 34 home insurers.

“It’s a disgrace that insurers charge exorbitant fees to make basic changes to a policy. These charges should reflect the real cost to the company and not a way of making easy money from consumers who are already struggling with high and rising insurance premiums,” said Peter Vicary-Smith, chief executive of Which.

“'We want insurance companies to be clearer about the fees that they charge and stop hiding the details away in pages of terms and conditions. The new regulator, the Financial Conduct Authority, must ensure that any charges reflect the actual cost incurred by the insurance provider.”

The report also said customers face “excessive” interest charges when paying by instalments, reaching between 29.3 per cent and 32.3 per cent.

A spokesman for Axa said Which had “got it wrong” over Swiftcover.

“Swiftcover.com has always been an online-only insurer, allowing customers to change their policy online whenever they wish, and as often as they need to – without charge. If, however, a policyholder chooses to update their policy by speaking to the help desk, there is an admin charge of £30, like with many other insurers.

“The annual percentage rate for each customer is calculated on risk therefore a flat rate indicated by Which is simply incorrect.”

A spokesman for the Association of British Insurers, said: “Paying by instalments reflects the increased financial risk to the insurer as there is evidence to suggest that those customers choosing not to pay in full for their policy upfront are more likely to make a claim.

“Insurers are committed to keeping administration costs as low as possible, but where they do incur costs that they cannot absorb then these may have to be passed on to customers.”