19 August 2010 / by Rachael Stiles
Some drivers who pay their car insurance by direct debit could end up paying more than they bargained for because not all car insurance providers are clear about the costs of paying monthly.
Low cost car insurance providers should clarify the cost of paying by direct debit, according to financial research company Defaqto, which has released a report addressing the challenges currently facing the car insurance sector.
Monthly instalments offers motorists a way of budgeting for their car insurance more easily, instead of having to pay the entire premium in one go; some insurers do not charge extra for this, but others do, with an average added cost of between eight and 11 per cent on top of the original premium.
Despite paying by direct debit pushing up premiums by a significant margin, eight per cent of the car insurance policies on the market do not state how much it costs for the privilege, Defaqto’s research found.
The report – ‘The motor insurance industry; at a crossroads’ – also notes that this extra cost is in addition to other charges, including fees for adjusting a policy, duplicate documents, cancellation and renewal.
Mike Powell, author of the report and Defaqto’s insight analyst for general insurance, said: “What should be a concern for the industry is the number of policies where the level of fees to be charged is unclear to the consumer. Professional researchers sometimes struggle to find this information, so what chance does an uninitiated customer stand?”
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