Insurers charging rates similar to credit cards for monthly cover

Some motorists could be charged nearly 40% APR when paying for their insurance monthly, according to Which?It added that the rates being charged by some insurers to pay for monthly cover resemble the interest applicable for credit card borrowing.

“We offer a range of APRs from 5% to enable us to provide credit to as many customers wishing to pay monthly as possible, including those with low or poor credit scores. Over the past quarter less than 2% of customers paid our highest APR.” Co-op Insurance works with partners to provide insurance cover – and it said it is looking to reduce rates where possible. It added that it chose to share its rates with Which? as it is committed to transparency.“We recognise the importance of premium finance as a product in the insurance industry, giving customers the option to spread the cost of their insurance over the course of a year.”

Fifteen home insurance providers surveyed said they do not charge interest: Bank of Scotland, Halifax, Hiscox, HSBC, Lloyds Bank, MBNA, M&S Bank, Nationwide Building Society, NFU Mutual, SAGIC, Sainsbury’s Bank, Santander, TSB, Urban Jungle and Yorkshire Building Society. The cost of premium finance is one of a number of topics we continue to discuss with our members and the Financial Conduct Authority

Rocio Concha, Which? director of policy and advocacy, said the FCA should “step up and to get tough with firms”.

Source: Loan Digest (loandigest.net)

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