Insurance giants’ £800m a year from rip-off extras

FOUR of Britain’s biggest insurance firms are raking in more than £800million a year by selling rip-off extras to their customers.

They are pocketing a bonanza through the sale of add-ons such as legal or breakdown cover which could be found much cheaper elsewhere.

Other tricks include hitting customers with sky-high fees to change details on policies, and charging more when drivers and homeowners pay in monthly instalments. Britain’s biggest motor insurer, Admiral, brags in its annual accounts that add-ons bring in £64 for every vehicle.

MPs and consumer groups accused the firms of preying on the unsuspected public to boost their profits.

Labour MP John Mann, a member of the Treasury select committee, said: ‘Customers are being treated like a cash cow.’

The revelation comes after families have been hit by surging premiums over the past year, with the cost of car insurance up 9 per cent to a record high of £481.

As well as Admiral, Hastings Direct, Esure and Direct Line also reveal in their 2017 accounts how much they rake in from add-ons and fees. Taken together, they collect a total of £806million. The industry-wide figure is likely to be far higher because other big insurers are less transparent. One study suggested it was £1billion as long as four years ago.

The big insurers that publish figures all reported rising earnings from add- ons in 2017. Admiral’s revenue from the sales climbed 7.5 per cent to £203million, mainly because of a jump in the amount it makes by charging customers more to pay in monthly instalments.

Direct Line netted £179million from add-ons last year, which was 8 per cent more than in 2016. At Hastings the total income from activities other than selling premiums was £299million – a rise of 20 per cent.

Esure made £125million from selling additional services, up 18 per cent. The firm said the practice brings in £65 for every car and £21 for every home.

Other major insurers such as Aviva do not break out how much they are pocketing in their annual accounts. Aviva boss Mark Wilson told the Mail this was because the amount is very small. Finance expert Justin Modray, of advice firm Candid Money, said consumers who sign up for insurance online are sitting ducks.

Insurers can lure these customers in with a rock-bottom basic premium, without showing whether their add- on costs are competitive or not.

Mr Modray said he was charged £40 for extra legal cover by one insurer but found exactly the same level of service from an independent provider for £20. He said: ‘The insurance industry has gone the way of the budget airline industry with really basic cover where you need to add on a lot of extras. If people aren’t careful they might go for the cheapest deal and end up paying a lot of unexpected fees.’

The Association of British Insurers said firms have to disclose fees and charges, and added: ‘Consumers should shop

‘Gone the way of budget airlines’

around.’ Hastings said: ‘ Our ancillary fees and charges are in line with others in the market and our premiums are some of the most competitive.’

Esure said: ‘Instalment income has risen simply as a result of the company selling more policies and the higher average premiums being seen across the industry.

‘We are very clear on the difference customers will see in the prices if they pay by instalments.’

Direct Line said it does not charge fees to amend policies, and the charge for paying by monthly instalments is communicated clearly to customers when they receive a quote.

Admiral declined to comment.