Regulator says distinction between monthly and annual payments not clear enough.
Insurers have been criticised by the Financial Conduct Authority (FCA) regulator for not making the difference in price between paying for policies upfront and paying in instalments clear enough.
The FCA looked at the online sale of home and car insurance and how people were asked to pay for their premiums. The review considered the processes of 13 insurers and 30 insurance intermediaries, including four price comparison websites.
It found insurers and intermediaries didn’t always provide clear and easily understandable information about the total cost of paying for insurance monthly, rather than annually.
The FCA said this made it hard to compare the difference between paying upfront or in instalments, and in some cases people may not realise there was a price difference between the two.
Failings
When a firm provides credit or is acting as a credit broker, they have 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.
But the FCA found a number of instances where either this information was not provided or was incomplete, limiting a shopper’s ability to make an informed choice on how to pay.
The APRs on this sort of credit agreement can vary widely, so it’s important to have all the information to hand in order to understand the impact of the cost of finance on the overall cost of the insurance product.
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 discovered that an adequate explanation of a proposed credit agreement was not always presented early enough in the buying journey to enable shoppers to make informed decisions.
What's more, firms acting as a credit broker didn’t always reveal the name of the credit provider or details of the relationship with the firm, and in some cases it wasn’t made clear that a fee would be charged.
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Taking action
The FCA said it expected all firms to take action where necessary to make the costs clearer to shoppers.
The regulator also warned it would follow up with individual firms where it uncovered specific examples of failings and poor practice.