Paying monthly can add up to £450 to insurance bills
DRIVERS and homeowners are being charged up to £450 more a year for insurance if they choose to pay monthly, it has emerged.
A Money Mail investigation reveals how some of the biggest firms are charging interest rates as high as 45 per cent if customers pay in instalments rather than annually.
The rip- off means that in the worst cases, families are unwittingly forking out hundreds of pounds more a year.
Around two in five customers pay for insurance monthly – meaning ten million drivers and eight million homeowners are potentially being charged extra.
Last night campaigners called for the practice to end, as it penalises those on lower incomes. Mick McAteer, director of the Financial Inclusion Centre think-tank, said: ‘Consumers are facing big increases in premiums with some bills running to thousands of pounds a year. A lot of people don’t have that kind of money lying around. Charging these high interest rates is taking advantage of these people.
‘People are already struggling to make ends meet and this is just squeezing them even further.’
With the cost of cover soaring due to increases in whiplash claims and premium tax, many families are paying thousands of pounds a year for car and home insurance. This means increasing numbers cannot afford to pay for a whole year up-front.
When a customer receives an insurance quote, they are often given the annual price as well as the monthly figure.
If they read the small print, they will find the monthly cost is calculated based on an interest rate, which is typically around 25 per cent but can be up to 45 per cent. But many do not realise the extent of the extra cost and simply opt to pay monthly.
Those with higher premiums, such as the elderly and young drivers, are worst hit.
Research for the Daily Mail carried out by comparison website GoCompare revealed how an 80-year- old couple with a Ford Focus would be quoted £4,792 for annual car insurance with Marks & Spencer. However, if they opted to pay monthly they would be charged an interest rate of 23.5 per cent, and would end up spending a total of £5,216 – or £424 more.
If the couple were both 70, they would be charged an annual premium of £1,003 with Endsleigh. But paying monthly would attract an interest rate of 44.1 per cent, or £168 extra. Similarly, a 20-year-old driver would pay an annual premium of £2,511 with Endsleigh. But paying monthly would mean interest of 44.1 per cent – and shelling out £2,960 in total, or £449 more.
Debenhams would offer a 26year- old driver an annual premium of £1,928. But it charges an eye-watering 44.72 per cent interest for paying monthly, meaning the customer forks out just under £2,263 in total.
This is based on a £395.61 initial down payment, plus ten monthly instalments of £186.73.
Debenhams had the highest interest rate, followed by Endsleigh. Hastings Direct charged 39.9 per cent, Swiftcover 35.81 per cent, Zurich 33 per cent, Esure 27.4 per cent, Churchill 24.5 per cent, Privilege 24.6 per cent and Aviva 20 per cent.
Similar rates also apply on home insurance. Admiral quoted an annual premium of £667 for buildings and contents cover on a four-bedroom home. Its interest rate of 21.8 per cent means a customer paying monthly would be charged an extra £62 a year.
Saga quoted an annual premium of £593, but this jumps by £58 if you pay monthly.
News of the insurance rip-off comes just days after the Mail
From Monday’s Mail exposed how firms were charging their most loyal customers up to £1,000 a year more.
Insurance giants were offering loss-making deals to attract new business, then reaping huge profits from long-standing customers by charging them up to three times as much. On Thursday, Aviva, Britain’s biggest insurer, revealed it was planning to overhaul the way it sells policies to ensure existing customers always get the best deal.
Not all insurers charge interest for paying monthly. Ross Garner of NFU Mutual, which does not, said: ‘Not everyone can or wants to pay their insurance premium in one lump sum, and we don’t think our customers should be penalised for that.’ James
‘Struggling to make ends meet’ ‘Good idea to shop around’
Dalton, of the Association of British Insurers, said: ‘By offering the choice of paying monthly as well as annually, insurers give customers the option of spreading the cost of their insurance over the whole year by entering a credit agreement.
‘Insurers have to follow the same strict rules as all businesses offering other forms of lending, which means customers must always be given details such as the cost of their monthly instalments and the total amount they will eventually pay.
‘It is always a good idea for customers to look at this total cost and to shop around to ensure they are getting the right deal.’
RIP-OFF Britain (1): A Mail investigation exposes how unscrupulous insurance firms extort interest of up to 45 per cent from customers who pay premiums monthly – a rate that would make the most rapacious loan companies blush.
Buried in the small print, these morally indefensible charges can add up to £450 to the cost of insuring a car.
Rip-off Britain (2): On the same day, it emerges that bosses of the UK’s ten biggest house builders have been paid almost £ 170million since the launch of the Government’s Help to Buy scheme.
This orgy of avarice has been partly at the expense of hard-pressed taxpayers, whose money was intended for cash- strapped first-time buyers.
Rip- off Britain ( 3): In an egregious example of greed, callous care homes charge grieving relatives thousands of pounds in ‘notice fees’ for rooms left free to be reused after the deaths of loved ones.
Three cases in a single day – all highlighting how ruthless firms exploit clients and taxpayers, using all means within the law to extort every last penny from families struggling to get by.
To that list, we could add any number of City firms and utility companies, enriching themselves by imposing unfair and often dishonest charges.
It is no good looking to Labour – in a world of its own, spending fantasy money like water – to stand up for those whose incomes are squeezed. But on planet Earth, these are the issues that most affect us.
Theresa May has sworn to champion the Just About Managing. To achieve this, the Tories must pledge to spend taxpayers’ cash as carefully as their own – and rein in the excesses of rip-off Britain.