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Increases to insurance policy excess fees


The independent finance research company Defaqto has recently released figures which have indicated that the excess fees that insurance companies apply when a customer makes an insurance claim have been rising sharply since 2008.


The research has also shown that some companies are applying the excess fees several times to a single claim.


The research was conducted on insurance policies for travel, motor, and buildings and contents insurance. It confirmed that excess fees have been rising for all of them.


Nick Starling, the director of general insurance for the Association of British Insurers (ABI) believes that applying excess fees is an effective way of keeping monthly premium costs lower, particularly for areas like motor insurance.


Mr Starling has advised customers to study the detail of any insurance policy and think carefully about what cover they need before they commit to buying.


Mike Powell, an insurance analyst at Defaqto, believes that customers tend to focus on the premium price when they choose an insurance policy. He thinks this is largely due to price comparison websites where customers tend focus on the premium costs, believing that this is the most important factor to consider when buying insurance.
It is important to understand your excess fees and how they would apply to any potential insurance claim when you are buying insurance.


The Financial Ombudsman Service (FOS) has confirmed that every year it receives hundreds of complaints regarding excess charges. Many of the complaints are for insurance claims where excess charges are applied several times to a single claim. They have upheld many complaints where they deemed that the application of multiple excess fees to a claim was unreasonable.


Multiple excess charges have been applied across many areas of insurance, from home damage caused by pests to lost baggage when travelling. In particular, multiple excess charges are increasingly applied in travel insurance claims.


Most insurance policies will apply separate excess charges for different items or incidents as they are often covered in different sections of the insurance policy. This means that the cost of a single insurance claim could take the claimant by surprise.


For example, if you were to lose your luggage whilst on holiday, there are items in your luggage which could fall under separate sections of your insurance policy. Where one policy might just apply a single excess excess charge of £75, another may apply the charge four or five times, increasing the charge up to £300 or £375 or more.


The Defaqto research has indicated that most travel insurers now apply multiple excess charges in this way and the number is growing. It shows that in the last three years, the percentage of annual travel insurance policies which apply excess charges by section has increased from 67% to 78%. Single trip policies that have adopted this method have also increased from 73% to 83%.


Mr Starling believes that the method of applying excess charges to different sections of a travel insurance policy is becoming more widespread because travel insurance tends to cover a wide variety of potential claims. He said that where claims for lost possessions may only amount to insurance payouts of a few hundreds of pounds, claims for emergency medical treatment can amount to payouts of thousands of pounds.




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