A Financial Conduct Authority (FCA) review has revealed that insurers and insurance intermediaries are not being clear enough about the cost of paying premiums in instalments.
The FCA thematic review of premium finance focused on the online sale of home and car insurance and followed the customer journey up to the point where purchasers are required to input their payment details.
The review included 13 insurers and 30 insurance intermediaries (including four price comparison websites) and the regulator said it expected all firms to take action where necessary.
Linda Woodall, acting director of supervision at the FCA, said that consumers should expect clear information about the payment options available to them.
“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,” she said.
The report says insurers and intermediaries do not always provide clear and easily understandable information about the overall cost of paying for insurance, meaning that consumers could struggle to compare the difference between paying upfront or in instalments.
It also said that some people may not realise there is a price difference between the two and in some cases it was not made clear that a fee would be charged by firms using a credit broker.
A spokesman for the Association of British Insurers (ABI), told the BBC: “Insurers want to ensure that any premium finance options are clearly and fully set out as part of the sales process, so that customers know exactly how much they have to pay for their insurance.
“Our members will be carefully considering the findings of this FCA review to ensure that all motor and household insurance customers understand the cost of the different premium payment options.”
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