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Car insurance auto-renewals: Your rights

A motorway at rush hourHere at Confused, our readers regularly get in touch with a number of their car insurance bugbears.

One of the most popular problems we’ve heard about has been an automatic renewal trap that is leaving many of you out of pocket. So we decided to take a closer look at the issue and let you know your rights if your insurer automatically renews your car policy without your agreement.

The auto-renewal trap

Many insurance policies contain an automatic renewal clause, which dictates that your policy will be automatically ‘rolled-over’ to another year if you don’t give notice within a certain period, usually four weeks.

It’s important to check the small print of any policy before signing up, but your provider should be in touch in 'good time' before your current deal expires, to act as a reminder and to offer you the chance to decline or negotiate your premium. 'Good time' is generally around 21 days before renewal but could be longer.

However, many of the Confused.com community have complained that they have not received this contact, and have in fact had money withdrawn from their bank accounts without their agreement.

In some cases we investigated, consumers had their motor cover renewed, despite telling their provider by phone that they wished to take out a policy elsewhere. This left them paying for two policies at once, and resulted in Direct Debit payments of hundreds of pounds being taken without their explicit consent.

If you tell your insurer over the phone that you do not want to renew your policy, then the provider should act upon this as it would any other form of correspondence. However, to be absolutely certain, it’s always a good idea to make a note of the time and date you called and the name of the person you dealt with, as well as following up any conversation with an email.

Taking these few easy steps could save a lot of time and effort tracing back previous correspondence should anything go wrong.

What are your rights?

Customers have a 14-day ‘cooling off’ period following the start of a new policy or renewal of an existing one, during which time they are legally entitled to cancel it. If you realise the error within this period, then you should be able to cancel your policy, although you may incur some pro-rata costs for the time and reasonable administration charges. Your insurance provider's exact terms should be easy to find within their policy document.

Once you have passed that 14-day cut-off, though, many insurance providers will charge you a hefty sum to cancel your policy; with one reader being charged a massive 50 per cent of his yearly premium to escape his contract. However, even if you have paid this fee already, that needn’t be the end of it, and you may still be entitled to get your money back.

If you feel you haven’t been treated fairly, then be sure to write a letter of complaint to your provider. The company should have a record of every correspondence you share, including all phone conversations – if there is a dispute then feel free to ask for copies of these. Take a look at this page for more useful tips on making a formal complaint to your insurance provider.

Your provider should deal with any formal complaints within eight weeks.  If you’re not satisfied with their response - or if they haven’t given one at all - you’ll then be able to refer it at no cost to the Financial Ombudsman Service (FOS), who can act as an arbitrator.

If the FOS does find in your favour, not only will you be exempt from paying any cancellation fees, but you should also be able to claim back any additional costs incurred as a result of the error, such as premiums that may have been withdrawn automatically from your account.

It can still be cheaper to cancel

Even if your claim is unsuccessful, you don’t necessarily have to sit tight and accept a far more expensive premium than you could get elsewhere. Cancellation fees usually come in at between £20 and £50, although, as we’ve seen, this can vary greatly depending on the provider.

As a result, in many cases it may well be that it is still far more-cost effective to cancel and opt for a new policy. To find out, just compare car insurance prices and calculate the difference. If you can find a better deal that still saves you money, then it may well be worth sacrificing a fee in order to get a cheaper deal overall.

Have you had a problem with your insurance provider? We want to hear your stories – email them to me at stephen.jones@confused.com or comment below to have your say.

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Stephen Jones

Stephen Jones

Stephen Jones was a reporter for Confused.com between 2009 and 2010, writing personal finance news and blogs. He has since moved on to MSN Money but continues to write for Confused.com.

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