The sneaky fees pushing up the cost of car insurance

Drivers are being squeezed by sneaky car insurance fees on top of the cost of their annual policies – adding extra pain to rising yearly premiums. 

A growing number of motor insurers are charging customers extra for administrative tasks, such as setting up or renewing a policy.

These fees push up the overall cost of insuring a car and are often not well understood by drivers, despite being listed in the small print of insurance contracts.

The number of insurance deals that charge admin fees is rising, according to price comparison website GoCompare. 

Not only this, but the level of those fees is going up too. 

The comparison site has reviewed the 332 comprehensive car insurance products in the market in 2023 and compared the admin fees charged today, compared with the same fees charged in the same period in 2022.

 For example, in March 2022 just 39 insurance deals charged a set-up fee of more than £60. That has now risen to 59, a rise of more than 50 per cent.

Also last March just 34 (10 per cent) of car insurance products charged a renewal fee of more than £60, but this month that has risen to 42.

Additionally, the number of car insurance products that do not charge a set-up fee has gone down from 195 in 2022, to 181 in 2023 – a drop of 7 per cent.

Insurers are charging higher fees due to regulation that was introduced in January 2022.

This regulation banned insurers from charging renewing customers more than new ones – the so-called ‘loyalty penalty’.

These rules were called the General Insurance Pricing Practices, or GIPP, and were brought in by the Financial Conduct Authority regulator.

But these rules only restricted premiums, not fees, leaving insurers free to hike the latter. 

 GoCompare car insurance spokesperson Ryan Fulthorpe said: ‘GIPP was a huge shift for the insurance industry, ending the so-called “loyalty penalty”, but one year on, we have now seen the number of insurance companies charging increased admin fees has increased. 

‘While this could be due to inflation and other factors, there is a possibility that insurance companies are feeling the pinch from the GIPP rules and have had to look at other ways to recoup these costs.’

Motorists taking out cover with a new insurer paid 11 per cent extra during 2022 compared to 2021, according to the Association of British Insurers.

However, drivers renewing existing policies paid 7 per cent less, or £392 on average.