A few months ago the regulating body that is the FSA (Financial Services Authority)removed a rule that restricted insurance companies from making excessive charges and since then the limits on administrative charges and fines imposed by insurers has gone through the roof. One of the most offensive offenders has been the AA who have increased their administrative charges for amendments to an obscene £25 per alteration.

When questioned, the FSA stated that the reason for the removal of the rule was because to date they have not been called upon to investigate a company for excessive charging. Maybe if they asked some of the AA customers who’ve had to shell out shameful amounts in the wake of the rule-removal if they felt investigation was necessary they would have an alternative point of view.

What is even more interesting is the variation amongst the insurers and their approach to administrative charges. Take for instance Hastings, who despite the relaxing of the rules have not made any increases, in fact they do not charge at all for making amendments, nor do they charge a cancellation fee. Compare this to the abominable AA who charge up to £75 for cancelling your contract with them, to be fair or unfair whichever way you choose to look at it, they are not the only company making obscene amounts of money off their customers. More Than charge some £55 to cancel and insurers like Direct Line, Churchill and Prudential have no limit to the charges they command from their customers who choose to cancel.

As blatantly unfair as it may appear to the common man it is in the hands of the FSA to reinstate the Insurance Code of Business to its original state and restore some form of regulation in the realm of insurance. Knowing that there is some £333 million to be made yearly off the backs of customers who commit the crime of change one is forced to mentally meander over the motivation of the FSA to take such a drastic step.

Whatever their reasoning, the repercussions will make themselves apparent very soon. The FSA have already been called to restore the rules that have resulted in so many people falling victim to the rising costs of car insurance. When the costs that are driving the costs of driving up are examined it is interesting to note that the elements contributing to the rise are sometimes completely unrelated to the cover itself. How can the reproduction of a document possibly cost the company £25? The simple answer is; it can't. Similarly the same conclusion was drawn when it came to the charges banks were dishing out left right and centre.

As an example for the car insurance sector banks are showing how much of an impact overcharging can have, with the jury still out on the banks Vs civilians on the matter of overcharging surely the insurance companies have kept their ears to the ground. If they have they would be conscious that the judge handling the case “had been told at the hearing that a separate investigation into bank charges by the OFT” showed that a charge of “up to 40 pounds every time an overdraft limit is exceeded had 'stirred up a hornets' nest' and had led to 'a flood of claims currently engulfing the court system in this country”.

If insurers continue on their current path of overcharging customers for minor admin amendments their situation will mirror that of the banks and they too will potentially face paying out billions to repair the damage done.

At the same time however if your situation does change and you find yourself needing to amend your details Ashton Berkhauer of uSwitch comments that “it’s important you don’t let the fees put off. Costly though they may be, not doing so could invalidate your cover entirely!”