Insurer LV= has announced it will no longer charge customers for basic amendments to their car insurance policies, admitting such fees are “unfair”.
“We know that customers often have to make minor amends to their policy for reasons out of their control and we don't think it's fair to charge them admin fees for this,” says LV= managing director John O’Roarke.
The move comes just weeks after price comparison site uSwitch revealed how insurers are earning £333 million every year by charging people as much as £25 just to amend their name or address on a policy.
PR stunt, or the start of wholesale change?
That news has sparked anger among UK motorists, who are already battling against rising premiums and fuel costs. LV= is the first insurer to backtrack on the exorbitant fees, but it is hoped that competitors will be forced to follow suit.
“We hope that LV= has issued a wake-up call to other insurers and that a precedent has been set which other insurance providers will now follow,” says uSwitch insurance expert Ashton Berkhauer.
At present, the AA charges the highest fees, at £25 for either a policy amendment or a duplicate document.
Regulatory loophole
The reason for the sky high cost is a lack of regulation. Without going into the technical details, the Financial Services Authority (FSA) removed an important section of the Insurance Code of Business (ICOB) three months ago, essentially giving insurers free reign to set fees and charges at any level they wish.
Why would the regulator do this? It claims the rule it removed serves no purpose as it has never needed to investigate a company for excessive charges.
Now that one of the guilty insurers has essentially admitted that these charges are unfair, it's possible motorists won't have to wait for other insurers to follow suit out of goodwill, but that the regulator itself will be pressured into reinstating that section of regulation protecting insurance customers.
In the mean time, the only thing beleagured motorists can do is keep costs to a minimum. Read our guide to cutting car insurance premiums here.
