Car and home insurance consumers might jump on to a price comparison website or shop around looking to grab a bargain, but they could end up paying very different extra fees depending on which product they pick.
Data from Defaqto, shared with Insurance Business, has shown that while many providers do not charge set up or renewal fees for car, contents and buildings insurance, some cover could cost more than £60 a pop to arrange or renew – and average additional fees for car insurance have been on the up across the board. An increasing proportion of contents insurance providers are also levying charges of £30 or more to set up or renew policies.
Car insurance buyers are now more likely to find themselves facing additional costs when shopping around, on top of the rising price of motor cover. In 2018, around eight in 10 (79%) insurers did not charge a set-up fee, but this had shrunk to just over five in 10 (52%) in 2023. The average car insurance set-up fee was £40.02 in 2023, up from £31.92.
|
Set-up fee charges – car insurance |
||
|---|---|---|
|
|
2018 |
2023 |
|
No fee charged |
79% |
52% |
|
Less than £20 |
2% |
3% |
|
£20 - £39.99 |
10% |
10% |
|
£40 - £59.99 |
4% |
25% |
|
£60 or more |
5% |
10% |
|
TOTAL |
100% |
100% |
Source: Defaqto
Loyal customers were also more likely to face renewal fee charges in today’s market. The average car insurance renewal fee for 2023 was £39.69, an increase on 2018’s £31.65. As of 2018, more than eight in 10 (83%) insurers did not charge a renewal fee, but this had declined to 55% in 2023.
|
Renewal fee charges – car insurance |
||
|---|---|---|
|
|
2018 |
2023 |
|
No fee charged |
83% |
55% |
|
Less than £20 |
1% |
2% |
|
£20 - £39.99 |
8% |
8% |
|
£40 - £59.99 |
4% |
25% |
|
£60 or more |
4% |
10% |
|
TOTAL |
100% |
100% |
Source: Defaqto
“As you can see, there has been a notable change in the number of standard comprehensive car insurance products that are now applying these fees, with just under 50% of products applying a ‘set-up’ and ‘renewal fee’ in 2023,” said Defaqto insight consultant (general insurance) Mike Powell.
The proportion of insurers with products charging a higher post-cooling off period car insurance cancellation fee also grew. In 2018, 58% of policies had a cancellation fee charge of £40 or more – this had grown to 77% in 2023, and the average cancellation charge was £52.42, compared to £47.02 in 2018, according to the Defaqto data.
|
Cancellation fees |
||
|---|---|---|
|
|
2018 |
2023 |
|
No fee charged |
21% |
10% |
|
Less than £30 |
16% |
7% |
|
£30 - £39.99 |
5% |
6% |
|
£40 - £59.99 |
48% |
49% |
|
£60 or more |
10% |
28% |
|
TOTAL |
100% |
100% |
Source: Defaqto
|
Average Fees for car insurance - 2018 - 2023 |
|||
|
|
2018 |
2023 |
% Diff |
|
Set-up fee charges |
£31.92 |
£40.02 |
25% |
|
Renewal fee charges |
£31.65 |
£39.69 |
25% |
|
Cancellation fee charges |
£47.02 |
£52.42 |
11.50% |
Source: Defaqto
High net worth and telematics policies were excluded from Defaqto’s standard motor policy analysis, which compared 227 products from 2018 to 238 products from 2023.
Almost one-third of car insurance buyers buy their policy based solely on price rather than breadth of cover, a recent Trakm8 survey found. Car insurance costs have been on the rise, driven by inflation and pricing rule changes, with the average premium at £629 for Q4 2022, up £100 year-on-year, according to WTW and Confused’s Car Insurance Price Index.
Fee changes were less pronounced in home insurance, which was split into buildings and contents insurance for Defaqto’s analysis.
While the number of insurers not charging a set-up fee for buildings insurance remained static at 73%, for those that did advertise a charge the average set-up fee cost was up 9% from £26.15 to £28.44.
|
Set Up Fee Charges – buildings insurance |
|||
|---|---|---|---|
|
|
2018 |
2023 |
|
|
Fee is 'not stated' |
13% |
3% |
|
|
No fee charged |
73% |
73% |
|
|
Less than £15 |
2% |
5% |
|
|
£15 - £29.99 |
10% |
7% |
|
|
£30 - £49.99 |
1% |
10% |
|
|
£50 or more |
1% |
2% |
|
|
TOTAL |
100% |
100% |
|
Source: Defaqto
Renewal fee charges were also up slightly for buildings insurance, at £28.54 versus £27.44 in 2018. However, 74% of products did not include a renewal fee, up from 71% in 2018.
|
Renewal Fee Charges – buildings insurance |
|||
|---|---|---|---|
|
|
2018 |
2023 |
|
|
Fee is 'not stated' |
15% |
3% |
|
|
No fee charged |
71% |
74% |
|
|
Less than £15 |
1% |
4% |
|
|
£15 - £29.99 |
10% |
8% |
|
|
£30 - £49.99 |
1% |
9% |
|
|
£50 or more |
2% |
3% |
|
|
TOTAL |
100% |
100% |
|
Source: Defaqto
The average annual cost of buildings insurance was £288 as of Q2 2022, according to ABI data.
In contents insurance, buyers of just over one in 10 (13%) products could expect to pay a set up fee of £30 or more in 2023, up from 2% in 2018.
|
Set Up Fee Charges – contents insurance |
||
|---|---|---|
|
|
2018 |
2023 |
|
Fee is 'not stated' |
15% |
3% |
|
No Fee Charged |
72% |
71% |
|
Less than £15 |
2% |
6% |
|
£15 - £29.99 |
9% |
7% |
|
£30 - £49.99 |
1% |
11% |
|
£50 or more |
1% |
2% |
|
TOTAL |
100% |
100% |
Source: Defaqto
Some consumers could also find themselves facing hiked renewal fees for contents insurance, with 12% of products advertising a charge of £30 or more, up from 2% five years prior.
The average cost of contents insurance was £116 as of Q2 2022, the ABI has said, meaning a charge of £30 would be equivalent to just over a quarter (26%) of the total average policy cost. Two per cent (2%) of products included a £50 or more fee – or at least 43% of the value of the average policy.
|
Renewal Fee Charges – contents insurance |
||
|---|---|---|
|
|
2018 |
2023 |
|
Fee is 'not stated' |
16% |
4% |
|
No fee charged |
72% |
72% |
|
Less than £15 |
1% |
4% |
|
£15 - £29.99 |
9% |
8% |
|
£30 - £49.99 |
1% |
10% |
|
£50 or more |
1% |
2% |
|
TOTAL |
100% |
100% |
Source: Defaqto
Cancellation charges after the cooling off period across both buildings and contents insurance, though, shrunk by 10.5% and 11% respectively, with the average cancellation cost falling by £3.24 for buildings and £3.32 for contents.
|
Buildings Average Fees - 2018 - 2023 |
||||||
|---|---|---|---|---|---|---|
|
|
2018 |
2023 |
% Diff |
|
||
|
Set-up fee charge |
£26.15 |
£28.44 |
9% |
|
||
|
Renewal fee charge |
£27.44 |
£28.54 |
4% |
|
||
|
Cancellation fee charge |
£33.48 |
£30.24 |
-10.50% |
|
||
Source: Defaqto
|
Contents Average Fees - 2018 - 2023 |
|
|||||||
|---|---|---|---|---|---|---|---|---|
|
|
2018 |
2023 |
% Diff |
|
||||
|
Set-up fee charge |
£26.92 |
£27.53 |
2% |
|
||||
|
Renewal fee charge |
£28.25 |
£28.27 |
0% |
|
||||
|
Cancellation fee charge |
£34.00 |
£30.68 |
-11.00% |
|
||||
|
|
||||||||
Source: Defaqto
Defaqto compared 451 contents products in 2018 against 338 products in 2023, and 439 buildings products from 2018 to 312 in 2023.
“The home insurance market has not seen as much change when compared to the car insurance market,” Powell said.
“However, we can still see that for both ‘set-up’ and ‘renewal’ fees, more products apply higher fees in 2023 compared to 2018 and this is also confirmed with the slight increases in the average fees.
“Though, the average ‘cancellation fee’ in both the buildings and contents products has seen a decrease by over 10% in 2023 compared to 2018.”
