Some insurance premiums still obscure instalment price differences

Some insurers are still not clearly telling customers whether paying insurance premiums monthly, fortnightly or quarterly will cost more overall than paying once a year.

The warning came in a report published today by the General Insurance Code Governance Committee, titled Clear costs at renewal: payment options and pricing transparency.

The General Insurance Code Governance Committee is an independent body that monitors and enforces insurers’ compliance with the Code of Practice.

Its review found that some insurers do not give clear and accessible information at renewal about the cost of each payment option.

Chair Veronique Ingram said: “When an insurer charges different amounts depending on how a customer pays, the insurer should clearly disclose the differences.”

Clear costs at renewal report

Some renewal notices used vague wording. They said annual payment “may” be cheaper or that instalment fees “may” apply, but did not set out the cost difference.

Many insurers were already meeting the committee’s expectation by clearly explaining the difference where one applied.

Some insurers in the review did not charge customers more for paying by instalments at all.

Ms Ingram said: “Customers should be able to easily see, at renewal, whether one payment option will cost more than another. That is basic price transparency.”

The committee said the problem affects a significant number of customers. In some products it reviewed, half or more customers paid by monthly or fortnightly instalments.

Those customers need clear information when making decisions about household expenses and whether to continue their cover.

Ms Ingram said: “This is not about telling insurers what pricing model they can use.”

However, insurers must be open and transparent if they charge different totals for different payment methods.

Ms Ingram said: “Many insurers are already doing the right thing. Some do not charge customers more to pay by instalments at all. Others do charge more but are upfront about the difference. In that context, it is unacceptable for any insurer to leave customers without clear information about what they will pay.”

She also said customers are entitled to clear and accessible information before they make a decision.

The General Insurance Code Governance Committee will continue to monitor insurer practices and may consider further action if insurers do not adopt sufficiently transparent pricing practices.