The insurers driving off with your cash

Drivers who need to change or cancel their motor insurance are being hit by unnecessary charges.

Customers who need to change their details, for instance – such as to their married name, or to a new address or new job – could be stung by charges of up to £26 for each change. And anyone who needs to cancel a policy could be forced to fork out up to £76.

The comparison site Confused.com has calculated that the average motor insurer charges £17.64 for each change to a policy, and £40 if a customer chooses to cancel.

Tesco has been named and shamed as charging the most – £76.92 – for cancelling a policy, while the Halifax, Esure and Sheilas' Wheels have the most excessive mid-term charge. They sting customers for £26 for each change they make to a policy.

To put the excessive fees into context, policyholders with M&S, Swiftcover and Virgin Money are charged nothing if they cancel their policy. Cornhill Direct, Ecar and Zurich make no charge for mid-term changes to a policy.

Making changes to a policy can involve an insurer doing a small amount of administration, so making a charge for that is fair enough. That's all the more reason to applaud the firms that do the work for nothing.

Some, like LV=, Saga and Swiftcover make a reasonable charge of just £10, which easily covers their costs.

But others are equally guilty as Halifax, Esure and Sheilas' Wheels of overcharging for the administrative work.

The AA, Budget, Co-op, Hastings Direct, HSBC, Ibuyeco, M&S and More Than all charge £25.

When it comes to cancellation, Egg, Lloyds TSB and Prudential all charge £66.92 while HSBC (£15) and AIG (£20) manage to get by on much smaller fees.

Is this just blatant profiteering at the cost of the consumer? "Some of the fees don't seem in proportion for the amount of work required to update policy information, and they need to be justified," says Will Thomas, head of motor insurance at Confused.com.

He points out that consumers have no protection from unreasonable mid-term and cancellation charges, so those who may need to make changes during the life of a policy need to be aware of these charges from the offset.

"New technology has allowed most insurers to operate a more streamlined system, but the administration costs have not fallen to reflect this," says Thomas. "Until the industry introduces consistency and makes these costs transparent, the only protection for consumers is to use common sense and check the terms and conditions before committing to the policy."