Insurance firms received a slap on the wrist from the City watchdog yesterday for failing to provide proper information to customers on the costs of various payment options.
The Financial Conduct Authority’s study found that insurance sellers do not always make it clear how much customers will pay if they pick various different payment options.
For instance, some insurers failed to make sure customers paying in instalments understood that it was a more expensive way to pay.
More than 40 per cent of motor insurance customers and more than 50 per cent of home insurance buyers pay in instalments.
Customers could also be left struggling to compare the relative prices of different products.
The FCA said that the key terms and conditions of insurance contracts are not always properly explained.
“Consumers should expect clear information about the payment options available to them,” said the FCA’s Linda Woodall. “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 finance on offer for customers also varies enormously, with annual percentage rates ranging from zero up to 75 per cent, as well as additional brokerage fees.
The review comes as part of a wave of activity from the FCA, which has a much wider scope than its predecessor, the Financial Services Authority.
This includes regulation of payday lenders, for example, as well as a greater focus on conduct, rather than simply a strict adherence to the letter of the law.