GBP300 Premium on Car Insurance

By MARTIN WILLIAMS

INSURANCE companies are charging drivers up to GBP300 a year interest for paying premiums in instalments, research showed yesterday.

Drivers who ease the pain of motor insurance premiums by using monthly direct debits pay up to 37.12per cent a year in interest, research by MoneyExpert. com, the price comparison website, shows. The average interest is 22.7per cent.

On an average annual comprehensive policy of GBP806, the typical driver pays GBP182 for opting to pay monthly.

The study showed the most expensive insurer was Provident, which charged 37.12per cent interest, meaning the average driver would pay nearly GBP300.

Only one in 12 motor insurance policies do not charge extra for paying monthly.

The average cost of a policy was based on the latest AA British Insurance Premium Index, which showed the average annual car insurance premium rose to GBP806, a new high, in the last quarter in 2006.

Insurers justify the interest rate by saying they are effectively giving customers a loan. If you have an accident a month after starting a policy, you are fully covered but have paid only a month's premium.

Some insurers do not charge interest, including Virgin Money, Insure. co. uk, Heyday and Norwich Union on its Just Car policy. Age Concern and Saga also do not charge, but their policies are not available to all drivers.

More-Than (13.7per cent) and Cornhill Direct (13.92per cent) charge below average interest.

Sean Gardner, chief executive of MoneyExpert, said the study showed the importance of shopping around.

(c) 2007 Herald, The; Glasgow (UK). Provided by ProQuest Information and Learning. All rights Reserved.