Hidden fees that put up cost of insurance

HIDDEN fees of up to £50 are being charged to those who pay monthly for home and car cover, it has emerged.

An investigation by City regulator, the Financial Conduct Authority, found credit brokers who provide loans for general insurance policies charge fees of between £10 and £50, yet fail to explain how or why they apply.

This makes it difficult for people to shop around for cheaper deals or work out if they can buy the policy for less.

The fees were revealed as part of the FCA’s major study into insurance, which found nearly half of all general insurance is bought online and paid for by monthly direct debit.

But opt for a direct debit and your insurer will charge you interest.

This is because you’re effectively borrowing the cost from your provider in the shape of a 12-month loan or credit agreement, and repaying it with interest every month. While some firms do clearly spell out the extra cost, others hit customers with unclear fees when offering credit through a third party.

In three out of the 43 cases that the regulator looked at, this fee was mentioned only in terms and conditions. And in six cases it wasn’t included in the explanatory examples given to customers, or in any information supplied to the customer.

Where the fee wasn’t shown, it was difficult or impossible to work out whether the APR included the fee, the regulator said.

Linda Woodall, acting director of supervision at the FCA, said: ‘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.’