Insurers rapped over hidden costs
Consumers are struggling to compare insurance products because there is not enough information about payment costs, the City watchdog said today.
A review of 13 insurers and 30 intermediaries, including four price comparison websites, found there was often a lack of detail to help people compare the difference between paying upfront or in instalments.
The Financial Conduct Authority (FCA) found a number of cases where firms failed to provide a r epresentative example setting out the interest rate, a representative annual percentage rate (APR) and the total amount payable.
It said this was limiting a customer's ability to make an informed choice about how to pay and in some cases meant people were not aware of the additional cost of choosing to pay by instalments. The review covered the sale of general insurance products, such as house and motor cover.
Linda Woodall, acting director of supervision at the FCA, said: " Consumers should expect clear information about the payment options available to them.
"Regardless of whether people choose to pay upfront or in instalments, it's important that they can see exactly what they are signing up for and how much it costs so they can decide whether they are getting a fair deal."
The FCA said it expects all firms to consider the findings of the review and take action where necessary. It is also following up with individual firms where it found specific examples of failings and poor practice.
Rebecca Rutt, senior insurance writer at MoneySavingExpert.com, said: " Paying monthly for car or home insurance means you're effectively choosing a high-interest loan because along with paying for the insurance, you're also paying for the interest added on by the insurer.
"Therefore, if you can, always pay it in full to avoid this. If you can't afford such a big lump sum in one go a credit card which charges 0% for a minimum of 12 months will cut your costs.
"Just make sure you make the minimum repayments each month, or you could lose the 0% deal, and clear the debt within the 0% period."
A spokeswoman for the Association of British Insurers said: "I nsurers want to ensure that any premium finance options are clearly and fully set out as part of the sales process, so that customers know exactly how much they have to pay for their insurance.
"Our members will be carefully considering the findings of this FCA review to ensure that all motor and household insurance customers understand the cost of the different premium payment options."