Home and car insurance comparison sites are often used as a point of clarification when starting to look at the mass of options that are available to them.
Compiling the hundreds of different companies and offers onto one simple page, organised by cost and length of contract can be a help. Whether a customer is short on time, or simply wants a simplified version of the available plans, comparison sites can be great.
However, experts are warning that the oversimplification of these quite complex contracts may be causing problems. As customers are usually not seeing a full policy, just a basic quote or a simple explanation of the policy, the small print can often be missed.
One such issue highlighted by the FCA (Financial Conduct Authority) is the use of monthly instalments vs. annual payment. Customers are often not informed that the monthly instalment plan leads to interest payments. Interest on monthly instalments pushes up the overall cost of the plan, but customers are not given enough information to make the decision on their own.
The FCA warned that almost half of the 43 websites (insurance companies and comparison sites) were not giving the customers enough information to make sure they knew the instalment option was potentially more expensive. The same survey also found that more than half of these sites did not list the interest rates these monthly instalments would be charged at. In several cases, the companies were not making customers aware that fees would be charged for using a 3rd party broker.
The survey concluded that more than 40% of motor insurance customers, and more than 50% of home insurance customers, would be far better off paying for their policy in full, rather than opting for monthly instalments.
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