Abbey National Insurance has estimated that more than £600 million is being paid each year by insurance customers for the convenience of paying monthly and not for the actual insurance cover.
Abbey National's research shows that more than two-thirds of the £600 million comes from insurance providers charging policyholders extra for paying motor premiums monthly. More than £460 million in extra charges is paid for motor insurance and £170 million for home insurance by customers
who choose to pay monthly.
The charges are usually made in the form of interest or an administration charge applied to the monthly premium. In many cases the charges can amount to 10% or more of the premium.
The monthly APR interest rates vary from AA at 24.9%, Churchill at 23.7%, esure at 21%, Direct Line at 19% to More Th>n at 13.7% 3.
Marketing director of Abbey National Janet Connor said: "Why should the vast majority of customers pay extra for paying monthly? We do not believe customers should be penalised for paying insurance premiums in the most
convenient way possible and for most people this is by paying monthly."
