Pinnacle Insurance and St Andrew's, a Bank of Scotland subsidiary, have been criticised for offering some of the highest premiums for unsecured personal loans.

In a survey, market analyst Datamonitor alleges that these insurers are charging customers up to three times more for creditor insurance than their competitors.

It also claims the cost of payment protection insurance is often obscured because it is not quoted in the Annual Percentage Rate of the loan, although this is not a legal requirement.

Datamonitor's Flora Weaver said: "Quoting APR for loans with and without loan payment protection insurance must become standard. Only double quotation will increase transparency and put a stop to hidden charges."

Newcastle Building Society leads Datamonitor's table for the most expensive personal loan insurance, charging £1,784 for covering a £5,000 unsecured loan spread over three years. This compares to a premium of £916 on a similar loan from lender Birmingham Midshires.

Newcastle BS spokeswoman Rachel Dodd said the society felt "upset that it had been picked on" by Datamonitor.

She explained that the product was provided by the Bank of Scotland's loans funding arm Capital Bank and underwritten by its insurance subsidiary St Andrews.

She said: "Capital Bank has set the level of premiums and the amount of interest charged. We receive commission on policies sold by Capital Bank but this is used to fund claims and is not pure profit."

Derek Williams, insurance manager for Bank of Scotland, questioned whether Datamonitor's assessment compared like-for-like cover. He said the premium quoted was for its most expensive gold cover and reflected the benefits offered.

"Our gold cover is the Rolls-Royce of creditor policies. It covers the outstanding balance of the loan and includes life cover for the borrower and their partner as well as accident, critical illness and redundancy cover."

Lombard Direct also come under fire from Datamonitor for highlighting its low interest loans but charging more for payment protection insurance.

A £5,000 loan over three years with Lombard Direct attracts a premium of £1,017 compared to £686 from lowest priced Alliance & Leicester. Lombard Direct said its product is underwritten by Pinnacle Insurance and offers flexible cover which could be varied at the borrower's request.