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The £73 cost of paying your car premium monthly: Companies raking in £1.5bn a year from drivers who cannot afford to pay annually.

By 10th January 2018 May 14th, 2019 No Comments

 

Insurance companies are raking in an extra £1.5billion a year in premiums

Moneysupermarket found 45.5% of people pay by monthly instalments

Drivers who pay monthly are charged £622 on average, compared to £549

nsurance companies are charging drivers an extra £73 a year just for choosing to pay monthly, according to a report.

Millions who choose or need to spread the cost of their car insurance by paying in monthly instalments.

Spiralling premiums means many cannot afford to pay their entire annual premium upfront.
But insurance companies are raking in an extra £1.5billion a year from drivers who choose the monthly option, according to comparison website Moneysupermarket.
The tactic is lucrative for insurers, with the number of motorists opting to pay monthly growing every year as car insurance premiums rise.
Worst affected are younger drivers who have to pay more and are generally less able to afford it in one lump sum.
Based on an analysis of almost 24 million car insurance quotes, Moneysupermarket found that almost half – or 45.5 per cent – of people pay by monthly instalments.
It found that drivers who pay monthly are charged £622 on average, compared to £549 for those who pay annually.
This equates to a difference of £73, or 13.3 per cent.
Consumer campaigners last night said customers are being ‘ripped off’ and said those who pay monthly are effectively being forced to take out high interest loans by their insurance companies.
One expert said motorists who do not have enough money in their bank account to pay in one go would be better off putting their car insurance on a low interest credit card and repaying it as quickly as possible.
Guy Anker from Moneysavingexpert, which compiled the figures, said: ‘This is another trick used by sneaky insurers to squeeze more money out of their customers.

‘Anyone who opts to pay monthly is choosing to get ripped off. They are essentially purchasing a loan at a very high interest rate.
It is almost always cheaper to pay upfront. And if you can’t afford to do that you are better off using a zero per cent, or low interest credit card.’
A separate report from Moneysavingexpert published in August discovered that Kwik Fit was charging the equivalent of an 101 per cent annual interest rate for customers who paid by monthly direct debit.
Other firms including Churchill, John Lewis, Admiral and Aviva charged more than 20 per cent, while Endsleigh charged 44 per cent and Hastings Direct 40 per cent.
But charity Age UK makes a point of charging no more for monthly instalments, recognising that many pensioners are struggling on lower incomes.
The insurance industry has faced a barrage of criticism for its treatment of customers.
​For years they have been accused of hoodwinking loyal customers by quietly increasing premiums and failing to print last year’s premium on renewal letters.
Experts have estimated this tactic allowed them to generate an extra £1billion a year.
In August the Financial Conduct Authority ordered insurers to include last year’ s quote on letters to empower customers to shop around for a better deal if their premium goes up sharply.
It marked a major victory for Money Mail which had campaigned to stop the renewal racket.
But some insurers, including Tesco Bank, are still using this ploy as they will not be forced to introduce the change until April next year.
Kevin Pratt, consumer affairs expert at Moneysupermarket said cash-strapped customers are an easy target for insurance companies.
He said: ‘Paying for your car insurance in one lump sum is a big ask, given that average premiums are well north of £500, so it’s no wonder that millions of people opt to pay monthly.
But insurance companies effectively charge interest when you take that route – so typically slapping another £73 onto the cost. By avoiding instalments, you’ll save money in the long run.’
Kwik Fit were approached for comment but did not respond.

Read more: http://www.dailymail.co.uk/news/article-3869040/The-73-cost-paying-car-premium-monthly-Companies-raking-1-5bn-year-drivers-afford-pay-annually.html#ixzz4O8SUOmLS
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Tim Kelly

Tim Kelly

Tim is a highly qualified Independent Engineer with over 20 years experience as an Engineering Assessor of damaged vehicles.

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