The sneaky fees pushing up the cost of car insurance
The sneaky fees driving up auto insurance costs…when drivers are already hit by renewal price hikes
- Hidden auto insurance charges increase the cost of vehicle coverage
- Insurers are asking more to offset the rules on the price of car premiums
Drivers are pressured by sneaky auto insurance costs on top of the cost of their annual policies – adding additional pain to rising annual premiums.
A growing number of car insurers are charging customers extra for administrative tasks, such as drawing up or renewing a policy.
These charges add to the overall cost of insuring a car and are often not well understood by drivers despite being stated in the fine print of insurance contracts.
The number of insurance policies that charge administration costs is increasing, according to price comparison website GoCompare.
Not only this, but the level of those fees is also going up.
Fully Charged: Auto insurers are turning to extra charges to line their pockets following premium pricing rules
The comparison site assessed the 332 comprehensive auto insurance products on the market in 2023 and compared the administration fees charged today to the same fees charged during the same period in 2022.
For example, in March 2022 just 39 insurance deals charged set-up fees of more than £60. That has now risen to 59, an increase of over 50 per cent.
Also last March, only 34 (10 per cent) of motor insurance products charged a renewal fee in excess of £60, but this month that has risen to 42.
In addition, the number of car insurance companies that do not charge a starting rate has decreased from 195 in 2022 to 181 in 2023, a decrease of 7 percent.
| March 2022 | March 2023 | |
|---|---|---|
| Number of car insurance policies | 332 | 332 |
| No renewal fees | 201 | 196 |
| Renewal charges over £60 | 34 | 42 |
| No interim cancellation costs | 44 | 42 |
| Cancellation charges over £40 | 238 | 250 |
| No setup costs | 195 | 181 |
| Start-up costs above €60 | 39 | 59 |
| Source: GoCompare | ||
Insurers charge higher rates due to regulations introduced in January 2022.
This regulation prohibited insurers from charging new customers more than new ones – the so-called ‘loyalty penalty’.
These rules were called the General Insurance Pricing Practices or GIPP and were put in place by the Financial Conduct Authority regulator.
But these rules limited only premiums, not reimbursements, leaving insurers free to raise the latter.
GoCompare auto insurance spokesman Ryan Fulthorpe said, “GIPP was a huge shift for the insurance industry, ending the so-called “loyalty penalty,” but a year later we see an increase in the number of insurance companies charging higher administrative fees.
“While this may be due to inflation and other factors, insurance companies may feel the bottlenecks of the GIPP rules and have had to look at other ways to recoup these costs.”
Motorists who joined a new insurer paid 11 percent more in 2022 than in 2021, according to the Association of British Insurers.
However, drivers renewing existing policies paid 7 per cent less, or an average of £392.