Latest news with #insurers
The Sun
2 days ago
- Automotive
- The Sun
Insurers slammed for ‘double dipping' customers and it adds up to £51 a year to bills – how to avoid it
INSURANCE companies have been accused of piling hidden costs onto customers who choose to pay in monthly instalments. Some consumers choose to use premium finance, aka paying in instalments rather than in one lump sum, to spread costs. 1 But concerns have been raised by regulator The Financial Conduct Authority (FCA) that some insurance companies are earning much more money than it costs to provide a premium finance service. Insurers will generally charge customers extra to pay in monthly instalments rather than yearly. But the FCA believes some "pay monthly" customers are also being forced to pay more for the insurance itself. This is a practice sometimes described as "double dipping", and it means you could be left more out of pocket. Insurers have said some customers paying monthly use payment methods that increase risk. Around half of motor and home insurance policies were paid for in monthly instalments in 2023. Some people might simply prefer to spread the cost but others cannot afford to pay annually. Last year, 60% of motor policyholders who paid through premium finance said they did so because they couldn't afford to make a single annual payment. Usually, insurance companies charge APRs of between 20 to 30% to customers choosing to pay by premium finance. In some cases it can be more than 30%. Drivers warned over common car feature that quietly causes insurance bill to spike – you'll pay more just for having it This would cost an extra £19 to £28 on an illustrative home policy and £35 to £51 on an illustrative motor policy – suggesting it costs consumers typically between 8% and 11% more to pay monthly rather than annually, the regulator said. Ealier this year, consumer champion Which? asked 52 car insurers and 46 home insurers what rates of interest they charged customers to pay for cover monthly. Among the insurers that responded, Which? identified the highest APRs were being charged by One Insurance Solution and The Insurance Factory. One Insurance Solution applied rates of 30.72% to 34.08% for home insurance, while The Insurance Factory imposed the same rates for car insurance. The consumer group highlighted that these rates are comparable to the borrowing costs of credit cards (35.42%), despite credit card providers taking on significantly higher risks when extending credit. More than a third of home insurance customers pay no more for paying monthly than annually, compared with less than 3% of motor insurance customers. Companies do have extra costs when they offer premium finance, including for staff, IT and compliance. Plus they might have funding costs or must sacrifice investment income by delaying the date of full payment. Credit products are also priced to compensate companies for high levels of bad debt or default. But the FCA's rules mean companies should not increase the insurance premium for customers using premium finance without a reasonable basis. It said in its latest update: "Where firms charge for premium finance, revenues appear to materially exceed costs for some providers. "Whereas the profit margin earned on a core insurance policy may be relatively low, we see margins on premium finance that are somewhat higher." Association of British Insurers (ABI) director general Hannah Gurga said: "Having the option to pay for insurance in monthly instalments can provide flexibility for those who need to manage their budgets. "Offering this service does involve costs for insurers and firms also have to keep cover in place for a period of time if a payment is delayed or missed. "Our premium finance principles, which we published last year, outline that any charges should be fair, transparent and reflective of the costs that the insurer faces. "We'll continue to work with our members on this matter and engage with the FCA's review." How you could avoid paying extra It is worth noting that if you don't have the cash to pay for your insurance upfront, you could find other ways of spreading the cost without high APRs. For example, you could use a 0% interest credit card. If you do this you must make sure you pay it off on time. Some banks also allow you to spread the cost of certain payments. For example, online bank Monzo has a Flex feature that lets you pay off some of your outgoings over the course of a few months. 'Concerning' evidence on how insurance claims handled The FCA also looked into how insurance companies handle motor insurance claims. It said it found "concerning" evidence of poor practices, including delays in settling claims, lack of oversight on outsourced services, and high levels of complaints. It also found evidence of failures to promptly identify and resolve claims handling issues, as well as cash settlements being used in some cases where it might not have been suitable. The FCA said it is addressing the issues directly with the companies involved, including taking action against some of them. How to get cheap car insurance CAR insurance is an essential cost that you hope to never use but will need to cover the costs of theft or damage to your vehicle. It's a legal requirement to have car insurance, and going without it could land you with a £300 fine, six penalty points on your licence and even a criminal conviction. But there are several ways to slash your premiums. Pay upfront Insurers give you the choice of paying for insurance monthly or upfront. Paying monthly spreads the cost of your cover but the insurer adds interest charges which means the average motorist pays around ten per cent more overall. If you pay for your car insurance annually you don't pay any interest. A typical motorist can save up to £225 a year by paying in one go, according to comparison site MoneySuperMarket. Increase your excess The excess is what you agree to pay each time you need to make a claim on your policy. You can usually choose your own excess when setting up a policy and it can be as low as £100 and as high as £500 or more. The higher your excess, the lower your premium and vice versa. This means you could bring the cost of your insurance down by agreeing to pay more if you do need to make a claim. But before you hike your excess, make sure you would be able to pay in the event that you do need to make a claim. Tweak your job Certain jobs are seen as more risky than others for insurance purposes. Making small but accurate changes to your job title can save you money. For example, swapping your role from "chef" to "caterer" can save you £20, comparison site GoCompare found. And changing your role from "fast food delivery driver" to "delivery driver" could save you £40. But lying about your job could invalidate your policy so make sure any changes are legitimate and accurate. Shop around Not all comparison sites have the same range of insurers so to get the best price it's a good idea to check two or three from Go Compare, Comparethemarket, MoneySupermarket and Insurer Direct Line is also not on comparison sites so check its prices directly. You can also get a free cash bonus by going via a cashback site such as Topcashback or Quidco. Save the date Renewing your car insurance sooner rather than later could save you some cash. New cover becomes more expensive the closer you get to the renewal date. But you can buy your car insurance up to 29 days before the policy start date and 'lock in' the price you're quoted on that day. A typical driver can save up to £265 buying new cover at least 27 days before their current policy ends, according to Go Compare.
Yahoo
2 days ago
- Business
- Yahoo
Some firms ‘earn much more money than it costs to provide pay monthly insurance'
Some firms earn much more money for providing insurance premiums paid by customers in monthly instalments than the cost of providing the cover, the regulator has said. Some 'pay monthly' customers may also face a higher charge for the underlying insurance premium – a practice sometimes described as 'double dipping'. Concerns have been raised that the decision to pay monthly may be factored into the pricing of the underlying insurance premium itself. The Financial Conduct Authority's (FCA) rules require firms should not increase the insurance premium to customers using premium finance without objective and reasonable basis for the change. Some insurers have said the choice of payment method is correlated with insurance risk for those paying monthly. The FCA's update paper on its premium finance market study said: 'If we see evidence of firms not having an objective and reasonable basis for taking such an approach, we will consider our supervisory approach on a firm-by-firm basis.' The update added: 'Where firms charge for premium finance, revenues appear to materially exceed costs for some providers. 'Whereas the profit margin earned on a core insurance policy may be relatively low, we see margins on premium finance that are somewhat higher. 'Different business models will have different ways of recovering costs. 'In some cases, they recover all costs through the insurance product itself, or recoup returns on lower margin insurance product through higher APRs (annual percentage rates).' The FCA's analysis found premium finance margins (revenue less economic costs as a proportion of revenue) ranging between 14% and 62% across insurers, intermediary lenders, intermediary brokers and specialist premium finance providers (SPFPs) in the period between 2018 and 2023. SPFPs averaged the lowest margins out of these four, with a weighted average margin of 24% between 2018 and 2023. Insurers had the highest weighted average margins of 53%, the regulator said. Firms offering premium finance incur some operational costs, for instance staff, IT and compliance. Lenders also incur funding costs or must sacrifice investment income by delaying the date of full payment, it added. Consumer credit products are also priced to compensate firms for high levels of bad debt or default, among other costs. The update said: 'Nevertheless, we find that some bad debt is incurred by premium finance lenders (with the ratio of bad debt to loan balanceranging from 0.6% for SPFPs to 1% for intermediary lenders) but not at the levels of other consumer credit products (1.9% for credit cards based on a sample of retail banks).' The FCA said premium finance is an important way of paying for insurance, and in 2023 it was used for around 48% of motor and home policies. For some consumers, premium finance is a choice, but for many, especially those in more vulnerable groups, it is a necessity because they cannot afford to pay annually, the regulator said. In 2024, 60% of motor and 41% of home (buildings and contents combined) policyholders who paid by instalments did so because they could not afford to pay in a single annual payment, it added. There is wide variation in the rates firms charge for paying by instalments. Typically, when firms charge extra for premium finance, the APRs are in the range of 20% to 30% but almost 20% of consumers pay more than 30%, the report said. Around 60% of consumers pay headline APRs that are between 20% and 30%. This would cost an extra £19 to £28 on an illustrative home policy and £35 to £51 on an illustrative motor policy – suggesting that it costs consumers typically between 8% and 11% more to pay monthly rather than annually, the regulator said. Interest rates on consumer credit vary across products and between consumers, but these APRs compare with monthly advertised interest rates in 2023 of 35% for overdrafts, 11% on a £5,000 personal loan and 23% for credit cards issued by financial institutions as reported by the Bank of England, the FCA's paper said. It added: 'Our own data, which captures a larger proportion of the market including cards marketed as 'credit builders', shows average APRs on new credit card agreements ranged between 26-32% at the end of 2023.' The cost of paying monthly also differs substantially between motor and home insurance, the FCA said. More than a third of home insurance customers pay no more for paying monthly than annually, compared with less than 3% of motor insurance customers. Some firms have indicated that cancellations and changes of policy tend to occur at a higher rate in motor than home, which leads to higher costs for providing motor insurance premium finance, the regulator said. Zero per cent finance options for home insurance also seem to be more common than in motor insurance in part because there is greater prevalence of buying direct from the insurer, enabling firms to more easily offset the funding and operational cost of offering monthly payments. The FCA now plans to carry out further analysis to look more closely at higher-priced products, the value these products provide, profitability, and the extent to which these prices are paid by vulnerable customers. Where it finds products with prices which are not reflective of the value offered, the regulator said it will be challenging firms to make sure they have considered all these aspects fully. The FCA will also investigate the extent to which consumers can effectively compare premium finance with other credit products. Its premium finance market study was launched in October 2024 as part of wider work on motor and home insurance, following concerns that premium finance may not represent fair value for some customers and that competition may not be functioning effectively. The FCA's findings are based on evidence and data that it has gathered from a request for information (RFI) from a sample of firms. It is seeking comments to further inform the next phase of the market study, and is inviting views to be sent by 5pm on September 30 2025.
The Independent
2 days ago
- Business
- The Independent
Some firms ‘earn much more money than it costs to provide pay monthly insurance'
Some firms earn much more money for providing insurance premiums paid by customers in monthly instalments than the cost of providing the cover, the regulator has said. Some 'pay monthly' customers may also face a higher charge for the underlying insurance premium – a practice sometimes described as 'double dipping'. Concerns have been raised that the decision to pay monthly may be factored into the pricing of the underlying insurance premium itself. The Financial Conduct Authority's (FCA) rules require firms should not increase the insurance premium to customers using premium finance without objective and reasonable basis for the change. Some insurers have said the choice of payment method is correlated with insurance risk for those paying monthly. The FCA's update paper on its premium finance market study said: 'If we see evidence of firms not having an objective and reasonable basis for taking such an approach, we will consider our supervisory approach on a firm-by-firm basis.' The update added: 'Where firms charge for premium finance, revenues appear to materially exceed costs for some providers. 'Whereas the profit margin earned on a core insurance policy may be relatively low, we see margins on premium finance that are somewhat higher. 'Different business models will have different ways of recovering costs. 'In some cases, they recover all costs through the insurance product itself, or recoup returns on lower margin insurance product through higher APRs (annual percentage rates).' The FCA's analysis found premium finance margins (revenue less economic costs as a proportion of revenue) ranging between 14% and 62% across insurers, intermediary lenders, intermediary brokers and specialist premium finance providers (SPFPs) in the period between 2018 and 2023. SPFPs averaged the lowest margins out of these four, with a weighted average margin of 24% between 2018 and 2023. Insurers had the highest weighted average margins of 53%, the regulator said. Financial Conduct Authority"> Firms offering premium finance incur some operational costs, for instance staff, IT and compliance. Lenders also incur funding costs or must sacrifice investment income by delaying the date of full payment, it added. Consumer credit products are also priced to compensate firms for high levels of bad debt or default, among other costs. The update said: 'Nevertheless, we find that some bad debt is incurred by premium finance lenders (with the ratio of bad debt to loan balanceranging from 0.6% for SPFPs to 1% for intermediary lenders) but not at the levels of other consumer credit products (1.9% for credit cards based on a sample of retail banks).' The FCA said premium finance is an important way of paying for insurance, and in 2023 it was used for around 48% of motor and home policies. For some consumers, premium finance is a choice, but for many, especially those in more vulnerable groups, it is a necessity because they cannot afford to pay annually, the regulator said. In 2024, 60% of motor and 41% of home (buildings and contents combined) policyholders who paid by instalments did so because they could not afford to pay in a single annual payment, it added. There is wide variation in the rates firms charge for paying by instalments. Typically, when firms charge extra for premium finance, the APRs are in the range of 20% to 30% but almost 20% of consumers pay more than 30%, the report said. Around 60% of consumers pay headline APRs that are between 20% and 30%. This would cost an extra £19 to £28 on an illustrative home policy and £35 to £51 on an illustrative motor policy – suggesting that it costs consumers typically between 8% and 11% more to pay monthly rather than annually, the regulator said. Interest rates on consumer credit vary across products and between consumers, but these APRs compare with monthly advertised interest rates in 2023 of 35% for overdrafts, 11% on a £5,000 personal loan and 23% for credit cards issued by financial institutions as reported by the Bank of England, the FCA's paper said. It added: 'Our own data, which captures a larger proportion of the market including cards marketed as 'credit builders', shows average APRs on new credit card agreements ranged between 26-32% at the end of 2023.' The cost of paying monthly also differs substantially between motor and home insurance, the FCA said. More than a third of home insurance customers pay no more for paying monthly than annually, compared with less than 3% of motor insurance customers. Some firms have indicated that cancellations and changes of policy tend to occur at a higher rate in motor than home, which leads to higher costs for providing motor insurance premium finance, the regulator said. Zero per cent finance options for home insurance also seem to be more common than in motor insurance in part because there is greater prevalence of buying direct from the insurer, enabling firms to more easily offset the funding and operational cost of offering monthly payments. The FCA now plans to carry out further analysis to look more closely at higher-priced products, the value these products provide, profitability, and the extent to which these prices are paid by vulnerable customers. Where it finds products with prices which are not reflective of the value offered, the regulator said it will be challenging firms to make sure they have considered all these aspects fully. The FCA will also investigate the extent to which consumers can effectively compare premium finance with other credit products. Its premium finance market study was launched in October 2024 as part of wider work on motor and home insurance, following concerns that premium finance may not represent fair value for some customers and that competition may not be functioning effectively. The FCA's findings are based on evidence and data that it has gathered from a request for information (RFI) from a sample of firms. It is seeking comments to further inform the next phase of the market study, and is inviting views to be sent by 5pm on September 30 2025.
Yahoo
2 days ago
- Automotive
- Yahoo
Regulator finds ‘concerning' evidence of poor handling of insurance claims
Insurers have been told by the Financial Conduct Authority (FCA) to improve their claims handling, following 'concerning' evidence of poor practices in some cases. The regulator said that, while rising motor insurance premiums are largely driven by external cost pressures, shortcomings persist in how some insurers handle claims. FCA analysis indicated that increases in the cost of motor claims – due to higher prices for cars, parts, labour, energy and more complex cars and supply chains – have contributed to premium increases. The cost of hire vehicles, the number and cost of theft claims and uninsured drivers have also risen significantly. This confirms that increased costs outside of firms' control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance. But the FCA did identify that referral fees from credit hire firms and claims management companies were associated with slower claims processing and increasing costs. Where it has seen poor practice from firms, the regulator said it is addressing it directly with them, including taking action against specific firms where necessary. The regulator said that 'concerning' evidence of poor claims handling practices included a lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes. It also found evidence of insufficient management information, resulting in failures to promptly identify and resolve claims handling issues. Cash settlements were also being used in some cases without sufficient consideration of whether they are most suitable, the regulator said. The FCA also highlighted high rejection rates for storm damage claims, saying only 32% of such claims made to a sample of firms in 2024 resulted in a payment. The regulator is also providing evidence for coordinated action from Government, industry, and other regulators, as part of the Government's motor taskforce, to help drive down the cost of motor premiums. This could help limit cost increases but it cannot prevent them, the FCA said. It has also published an interim update of an ongoing premium finance market study investigating whether consumers receive fair value when choosing to pay for insurance in monthly instalments. While premium finance allows customers to spread costs, making them affordable and providing flexibility, the regulator has found some firms earn much more money than it costs to provide the service. It will explore these concerns further in the next phase of the study. The FCA said it will seek to tackle any issues it finds first through the Consumer Duty, publishing a final report by the end of 2025. Sarah Pritchard, deputy chief executive of the FCA, said: 'Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens. 'External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel. That's why we're stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums. 'A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people's resilience to financial and personal shocks.' The FCA also said that evaluation of previous pricing reforms showed they are having the intended impact on the price gap between new and existing customers in both the motor and home markets. This means its reforms were effective in curbing 'price walking' where loyal customers were charged more at renewal, the regulator said.
News.com.au
2 days ago
- Business
- News.com.au
Why you could be wasting over $12,000 a year
While inflation and interest rates are now easing, most people are still doing it tough. Natural disasters continue to impact food prices, and petrol costs fluctuate based on overseas wars. Here's some good news: you've probably got ways to save money hiding in plain sight. Most Aussie households are bleeding money in one or more of the following ways: 1. Loyalty taxes Banks, insurers, telcos and utilities offer better deals to new customers while jacking up prices for existing ones. It's called the 'loyalty tax'. And it can add thousands to your bills. For instance, automatically renewing your car's CTP could cost you up to double! Review your spending at least annually. Shop around for a better deal then ask your current provider to beat (or at least match) it. If they don't, switch. Potential savings: $20+/month per bill; $100+/month on a mortgage. 2. Not rightsizing insurance Surprisingly, many people pay for cover they no longer need. A good example is women with maternity cover even after going through 'the change'. Review policies before each renewal. Update your cover as your circumstances change. Potential savings: Upwards of $5/month. 3. Having multiple loans Multiple loans means multiple interest rates. Average rates are around: • 6 per cent on a mortgage • 10 per cent on a car or person loan • over 20 per cent on credit cards Consolidate expensive debts into one loan with a lower rate. Potential savings: Around $1500/year, depending on debt size, type and your credit history. 4. Paying loans monthly Monthly repayments equal 12 per year. But fortnightly repayments equal 26 each year (not 24) since most months have 4.5 weeks. More repayments pay the loan off faster and reduce overall interest. Potential savings: $6124/year (assuming a $500,000, 30-year mortgage with a 6.23 per cent rate). 5. Paying with cards How much is the convenience of the fantastic plastic costing you? Transaction fees average 0.25 per cent to 2 per cent across credit and debit cards. That quickly adds up each time you pay bills or buy groceries. Instead, use cash wherever possible. Potential savings: Up to 2 per cent on all spending. 6. Forgoing cashback apps Cashback apps pay a portion of your online shopping back into your PayPal or bank account. If you aren't registered and logged in when shopping online, you won't receive these payments. Register with a reputable cashback app (e.g. Cashrewards, ShopBack). Some banks have their own (e.g. Commbank's Yello, NAB's Goodies). Potential savings: Average $6-7 on every $100 spent. 7. Unused subscriptions Subscriptions are perhaps the easiest way to bleed money. The amount just disappears from your account automatically, without you doing anything at all. They quickly add up, as the following averages show: • Gym membership: $70/month = $840/year • Streaming services: $8-$26/month = $96-$312/year • Magazines – $85/year • Professional memberships – $95 – $1,200/year That's over $2400 each year! How many are you still actively using? Review your bank statement monthly. If you no longer use something, cancel it ASAP. Potential savings: $7-$70 each/month. 8. Unclaimed tax deductions H&R Block suggests Australians on average miss out on $237.44 in unclaimed deductions each year. Commonly overlooked deductions include: • Expenses (working from home, travel, self-education) • Industry-specific and workplace safety costs • Ongoing financial advice • Depreciation • Super contribution benefits Keep good records to avoid missing claims. Your accountant and financial adviser will help maximise your deductions. Potential savings: $237/year. 9. Incurring late fees What do energy bills, council rates, tax, mortgages, credit cards, Buy Now, Pay Later (BNPL) schemes, libraries, tolls, and traffic fines all have in common? You'll pay more if you pay them late. Late fees can be up $50 each time. The ATO applies penalty units of up to $330. Others accrue interest on the amount owed. Automate bills and save due dates into your calendar to pay on time. Potential savings: 70 cents – $400 each. 10. Unclaimed gift cards News of the unclaimed $100 million Powerball win enthralled the nation. Yet unclaimed money is more common than you think. Aussies lose a staggering $1.4 billion on unused gift cards alone. That's $51 for every single one of us. Regularly check your purse, wallet, utility draw and car glovebox. When you find one, use it … or lose it! Potential savings: $51. 11. Not investing The longer you wait to invest, the more you miss compound earnings plus any tax benefits (like deductions for superannuation contributions). Your financial adviser can help you create your investment strategy to maximise returns and minimise tax. Just $20/month invested for 30 years, averaging 7 per cent returns, nets you an extra $24,399.42. Invest $500/month and you'll be $609,985.50 richer! Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99). Helen is among the 1 per cent of financial planners who hold a master's degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at
