The complaint

Mr B has complained about the refund of premium he received when he cancelled his

Learners Motor Insurance policy with Collingwood Insurance Company Limited. And the fact

that he was charged a £40 cancellation fee.

The cancellation fee was charged by Mr B’s insurance broker, not by Collingwood, so I have

not considered this aspect in this decision.

Mr B is represented by Mrs D.

insurance broker to let it know Mr B had passed his test. It told her Mr B’s policy would have

to be cancelled. It then let her know that this meant Mr B owed them £26.50. Mrs D was

surprised by this, as she had expected Mr B to get a refund.

Mrs D complained to both Mr B’s broker and Collingwood on his behalf. She said Mr B was

unhappy that he had £26.50 left to pay and that he was forced into cancelling the policy.

Collingwood issued a final response letter on the complaint to Mrs D. In this it provided a

breakdown of the charges for Mr B’s policy. This showed Mr B had only received a refund of

10% of the premium, despite the policy being cancelled about 70% of the way through its

term. It also showed his broker had charged a £70 fee for arranging the policy and a £40 fee

for cancelling it. Collingwood didn’t uphold Mr B’s complaint. In doing so it said it was

cancelled was unfair.

One of our investigators considered Mr B’s complaint. He said that he didn’t think the refund

provided by Collingwood was fair on the basis it didn’t represent the spread of risk under Mr

B’s policy. He said Collingwood should provide a pro rata refund.

Collingwood didn’t agree with the investigator’s view and asked for an ombudsman’s

decision. It explained that the likelihood of a claim in the last three or four months of the

type of policy Mr B had was much lower than in earlier months. And it also explained

that the reason it doesn’t provide any refund at all in the last three months of the policy term

for its Learners Motor Insurance policy is that it discounts the premium on every policy it

sells. Collingwood’s point was that if it had not provided this discount and instead charged

I’ve considered all the available evidence and arguments to decide what’s fair and

reasonable in the circumstances of this complaint.

I do not agree with Collingwood’s view that ICOBS 7.1.2 has any bearing on what it can

charge for cancellation outside the cooling off period. In my opinion, all this is referring to is

the right to provide a longer cooling off period if a firm wants to and the fact that this must be

on terms at least as favourable to those set out for the cooling off period in the remainder of

Chapter 7.

In my opinion, ICOBS is silent on what a firm can charge for cancellation after the cooling off

period has ended. But the Principles for Businesses set out in the FCA Handbook mean that

Collingwood needs to act with due regards to the interests of its customers. It also needs to

Collingwood discounts the premium for every policyholder. I can’t go into more detail than

this, as I think the detailed information Collingwood has provided is commercially sensitive.

But I think it means that if Mr B had not been charged the discounted premium at the

beginning he would have ended up paying roughly the same for the period he was on cover

if he had received a pro rata refund of the higher premium he would have paid. I appreciate

this is not a full explanation, but I hope it will be clear to Mrs D why I think the refund terms in

the policy aren’t unfair.

I’ve also considered Collingwood’s other obligations under ICOBS and the Insurance

Distribution Directive and what these say about the Insurance Product Information Document

(IPID). These and good industry practice make it clear Collingwood needed to produce an

early. In view of this I think Collingwood needed to include in the IPID the fact the policy will

have to be cancelled if the policyholder passes their driving test, that the refund provided is

not on a pro rata basis and specifically that there is no refund at all in the last three months

of the policy period. This information was not included in the IPID. The IPID simply refers to

the fact that if the policyholder cancels after the cooling off period has ended a refund will be

calculated in accordance with the scale at the end of the cancellation section of the policy

document. I don’t think this is good enough for me to conclude Collingwood met its

obligations in respect of the IPID.

This means I need to consider whether Collingwood’s failure to meet its obligations in

whether he would have acted any differently if the IPID had referred to the fact his policy

refund of premium at any point. And that he wouldn’t receive any refund at all in the last

continued with the policy if he got the IPID shortly after buying it and saw that it would need

to be cancelled if he passed his test in the policy period and that he would not receive a pro

Mr B couldn’t have known for sure he would pass his test in this period. And, as I’ve said, the

premium was fairly low.

However, if the IPID had included what I’ve suggested above, Mr B wouldn’t have been

distressed when he found out he wasn’t receiving a pro rata refund. And it wouldn’t have

think he was distressed because it came as a shock to him that he had something left to

pay. And he found this frustrating and inconvenient. In view of this I think he should receive a

small amount of compensation for the distress and inconvenience Collingwood’s failure to

response to my provisional decision.

Mrs D responded on behalf of Mr B. She has said the broker is part of the same group as

Collingwood and she thinks her complaint about the £40 cancellation fee charged by the

broker should be taken into account as part of this complaint. She also feels the way the

‘headline’ premium is calculated and shown on comparison sites, when obtaining quotes, is

misleading.

Collingwood responded to say it welcomes my comments on the IPID and will review it in

light of them.

What I’ve decided – and why

I’ve noted Mrs D’s comments about the cancellation fee and appreciate the broker is part of

have not disagreed with the outcome set out in my provisional decision, I see no reason to

reach a different outcome to the one I suggested in it.

Putting things right

For the reasons set out in my provisional decision, I’ve decided to uphold Mr B’s complaint

and make Collingwood pay him £50 in compensation for distress and inconvenience.

My final decision

I uphold Mr B’s complaint and order Collingwood Insurance Company Limited to do what I’ve

set out above in the ‘Putting things right’ section.

Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B to accept or

reject my decision before 28 December 2023.