Insurance companies are not making it clear that payment by instalments is more expensive, says the Financial Conduct Authority, (FCA).
Paying insurance premiums in monthly instalments costs more than paying annually and the insurance regulator, the FCA, says that this is not made clear enough by insurance companies, brokers and comparison websites. As a result, comparing the insurance products offered by different companies is difficult.
The FCA has instructed all companies concerned to take action where appropriate.
According to the regulator, a number of insurance firms, brokers and other intermediaries do not always make the overall costs of paying for insurance explicitly clear to customers. Consequently, many do not understand that paying by monthly instalments is more costly than making one annual payment alone.
Research by the Financial Conduct Authority focused on car and home insurance sold online by thirteen insurance companies and 30 brokers. It examined the process from first enquiries to the point where clients pay for the product they have selected.
The FCA’s acting director of supervision, Linda Woodall, said that customers are entitled to a clear explanation of the payment options offered to them. Consumers expect a fair deal which means that they should be able to view exactly what they are signing up for and the precise costs involved.
Some insurers or their intermediaries were providing credit to their customers but failing to set out the interest rate, fees and charges, the annual percentage rate (APR) and the total amount payable in a representative example.
In some cases, reported the FCA, it was not clear that an additional fee would be charged by the credit broker as well as the insurer.
A spokesperson for the Association of British Insurers said that they would consider the FCA’s findings, in order to insure that consumers were made fully aware of the cost of different payment options.
For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.
Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.
Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.
