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Know Your Rights: Cooling-off period for car insurance

As consumers, we often find ourselves overwhelmed with complicated contracts and unclear terms and conditions. In case of lack of awareness, customers are subjected to abuse, especially in case of everyday contracts such as car insurance policies. Many individuals are unaware of their rights regarding the cooling-off period for car insurance policies in the UK. In this blog post, we shed light on this crucial period, discuss unjust charges imposed by insurance companies, and explore the role of the Financial Conduct Authority (FCA).


S143 Road Traffic Act 1988


Under s143 of the Road Traffic Act 1988, you must have motor insurance to drive your vehicle on UK roads. Not having car insurance can result in serious consequences such as:


I. Fixed Penalty Notice (FPN): You can receive an FPN of £300 and six penalty points on your driving license. The penalty points can significantly affect your insurance premiums in the future.


II. Court Prosecution: If the matter goes to court (e.g., lack of driving licence), the penalties can be more severe. You could face an unlimited fine, be disqualified from driving, or even have your vehicle seized and destroyed.


A conviction will not appear on a criminal record but an IN10 endorsement will remain on your driving licence for four years - and you’ll need to disclose it to insurance providers for a further year.


Understanding the Cooling-Off Period


You might be unhappy with the current insurance company and start looking for someone else on the market. It is your freedom to contract with whomever you wish as far as they can provide a regulated service, i.e., insurance. You're under a legal obligation to have valid insurance at any time you enter public roads, which means a transfer from the previous to the current provider might be required in a single day.


The cooling-off period is a fundamental right provided to policyholders in the UK when they purchase car insurance. It allows you to cancel your policy within a specified timeframe without incurring significant financial penalties. The duration of the cooling-off period varies among insurers but typically ranges from 14 to 30 days. During this period, you have the right to change your mind and cancel your policy for any reason.




Unjust Charges: Know Your Rights


Unfortunately, many insurance companies have been unjustly charging customers for exercising their right to cancel during the cooling-off period. These charges can include administration fees, policy setup fees, and even charging for the days of cover provided. It is important to note that the charges levied must be reasonable and reflect the actual costs incurred by the insurer. They should not be used to discourage policyholders from cancelling their policies.


Example:

Your current policy ends on 15 July 2023. Your agent suggests a new policy, with a different provider, that seems to fit your needs better than the previous one. You decide to transfer the car to the new provider, and in order to do that, you make all the dispositions over the phone with your agent. The new policy is about to start on 16 July 2023.


Around 10 August 2023, you receive a notice charge from the previous provider claiming that you owe them circa £200 for the new insurance period. Are they correct?


If you encounter such unjust charges, it is crucial to be aware of your rights. According to the FCA's regulations, any charges imposed by insurance companies during the cooling-off period must be fair, transparent, and proportionate to the costs incurred. If you believe you have been unfairly charged, you have the right to challenge these fees and seek a refund.


Furthermore, if you feel that an insurance company has treated you unfairly or imposed unjust charges during the cooling-off period, you have the right to file a complaint with the FCA. The FCA has the power to investigate and take appropriate action against insurance companies found to be in violation of its regulations.


How to Complain to the FCA


To file a complaint with the FCA, you should gather all relevant documentation, including your policy details, any correspondence with the insurance company, and evidence of any unjust charges imposed. You can then submit your complaint to the FCA either through their website or by contacting their dedicated helpline.


The FCA will review your complaint and assess whether there has been a breach of its regulations. They may also take enforcement action against the insurance company and ensure that you’re provided with an appropriate redress.

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Have you recently received a charging notice and don’t know what are the next steps? Are you being chased by the previous insurance provider of a debt collection agency (DCA)? If you require guidance or further education, stay in touch with us via the Ask the Team form.




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