Insurance payments not clear enough, says regulator
- 11 May 2015
- From the section Business
The Financial Conduct Authority (FCA) says insurance companies are not being clear enough about the cost of paying premiums in instalments.
The FCA said online sales by insurers, brokers and price comparison websites could leave people unaware of the difference between paying monthly or yearly.
It said this made it difficult to compare products.
The regulator said it expected all firms to take action where necessary.
The FCA said its findings revealed that insurers and intermediaries did not always provide clear and easily understandable information about the overall cost of paying for insurance, meaning that consumers could struggle to compare the difference between paying upfront or in instalments.
In some cases, people may not realise there is a price difference between the two.
The FCA focused on the online sale of home and car insurance and followed the process up to the point where customers are required to input their payment details.
The review included 13 insurers and 30 insurance intermediaries, including four price comparison websites.
Linda Woodall, acting director of supervision at the FCA, said: "Consumers should expect clear information about the payment options available to them.
"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."
The FCA also said firms providing regulated credit or acting as credit brokers were failing to provide a representative example setting out the interest rate, any fees or charges, a representative annual percentage rate (APR) and the total amount payable, which they are required to do.
In some cases, it was not made clear that a fee would be charged by firms using a credit broker.
A spokesman for the Association of British Insurers (ABI) said: "Insurers want to ensure that any premium finance options are clearly and fully set out as part of the sales process, so that customers know exactly how much they have to pay for their insurance.
"Our members will be carefully considering the findings of this FCA review to ensure that all motor and household insurance customers understand the cost of the different premium payment options."