Insurers have hit back at claims made by Abbey National Insurance that customers are charged more than £600m each year to pay their premiums monthly.
Abbey National's research suggests more than two-thirds of the £600m comes from insurance providers charging policyholders extra for paying motor premiums monthly.
The research says that the annual percentage rates (APR) vary. AA Insurance Services is at 24.9%, Churchill is at 23.7% and esure comes in at 21%.
It says the charges are usually made in the form of interest or an administration charge applied to the monthly premium and in many cases, the charges can amount to 10% or more of the premium.
The AA has responded to the claims, saying the price of its instalment package could not be looked at in isolation of the policy.
"Our customers are offered a monthly price for their insurance. They choose to insure with AA Insurance Services and spread the cost because the total price offered is competitive," a spokewoman said.
"Our APR is fairly typical of in-house lending where the loan can be as small as £100."
She said the charge levied covered the cost of administration, customer service, bad debts and the actual cost of funding the loan.
A spokesman for Churchill said half of its customers choose to pay monthly and the charges are "transparent and upfront".
He said: "The charges are pretty similar to most others and if there were no charge, customers who pay upfront will subsidise the others."
Abbey National marketing director Janet Connor said; "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".
