Insurers under fire on premium finance

Insurers have come under fire once again for the rates they charge customers for paying premiums monthly.

Under the headline “How insurers rip you off”, the Daily Mail today lambasts insurers for profiteering from clients who are least able to pay the “punitive” interest rates charged for premium finance.

The newspaper claims that paying by instalments for motor and home cover costs Britons a total of £500m in interest on their finance deals.

According to the Mail, customers caught out are likely to be older homeowners or younger drivers, who are least able to pay. The newspaper quoted insurers saying that more customers are opting to pay monthly as insurance costs are pushed higher by rising Insurance Premium Tax and whiplash fraud costs.

Research commissioned by price comparison firm GoCompare shows 20.1 million car insurance policies in the UK, and 38% of people paying monthly. GoCompare said two in five homeowners pay insurance monthly, a total of 8million.

The newspaper singled out Debenhams and Endsleigh for charging the highest annual percentage rates on the market at 44.7% and 44.1% respectively. It said that meant the average young driver would pay around £112 per month, making their policy £235 more expensive than if they had paid annually.

Endsleigh parent company Zurich responded to the criticism: “Car insurance is highly competitive and we always encourage customers to shop around. We are very clear in the quote process about the cost of paying annually or monthly, but our customers tell us it’s important they have a choice.

“The APR itself reflects the costs to us of obtaining the finance on behalf of our customers, but we review the rate throughout the year as we want to make sure we’re not making insurance all the more difficult to obtain - particularly in the light of recent increases to Insurance Premium Tax, and the impact that the recent change to the personal injury Discount Rate has on premium prices.”