The Financial Conduct Authority (FCA) has carried out a review of premium finance for car and home insurance and it makes for interesting reading. The review looked at the online sale of these two products with 30 insurance intermediaries and 13 insurance companies between October 2014 and January 2015. Included in these numbers were 4 price comparison websites.
The results of the review found that some insurance companies and intermediaries did not always make the overall cost of such insurances clear. This could result in some customers finding it difficult to compare the cost of either paying monthly or by paying for the annual premium all in one go upfront. Rather worryingly, some people may not even be aware that there is a difference between these two payment options.
The FCA pointed out that firms that acted as credit brokers or provided regulated credit should give the customer certain information when providing quotes such as the annual percentage rate (APR), charges/fees, interest rate plus the total amount that is payable. The review found that such information or just some of it was not always being provided. Furthermore, it was found that the APR being charged varied on occasions between insurers.
As a result of this review, the FCA insists firms must take into account what they have found and, if required, take appropriate action. The FCA will also be taking additional actions to protect the consumer where necessary.
It is estimated that around 40.6% of people pay for motor insurance on a monthly basis and 53.1% of private motor insurance sales take place online.
It is important that the customer is clearly made aware of what the total cost of their car insurance is going to be before they agree to take out the policy. This applies when either being provided with quotes to pay the premium all in one go at the outset as well as paying monthly. With the APR varying between some insurance companies, this will also have an impact on the overall cost.
It will be interesting to see how quickly those that are falling short of how they should be presenting the premium finance information to customers make the appropriate changes.