Motorists suffer rise in insurance administration fees

Analysis by independent financial research company Defaqto reveals rapid growth in both the prevalence and the scale of charges for administration fees in car insurance policies.

Mike Powell, Insight Analyst for General Insurance at Defaqto said: "There has been a noticeable and significant trend for motor insurance policies to charge administration fees for features that were in many cases previously standard services. Many consumers will be unaware that they may actually be paying a setup fee or a renewal fee for their motor insurance. Such fees will be detailed in the accompanying documentation or in the renewal quote."

Mr Powell added: "Motorists cancelling policies mid-term need to be aware that there are four different ways in which charges may be levied. Some policies will levy a pro rata charge, some will levy a pro rata charge and a cancellation fee, some levy a short period charge and some levy a short period charge and a cancellation fee. Short period charges are more costly than pro rata charges. While the average cancellation fee is £37, some insurers are charging as much as £85."