21.1% APR on buildings & contents insurance!!

_Quicklearner_

Hi there,

I really need some advice. I've 'inherited' a house that has a subsidence issue and have therefore maintained the same insurers who started the monitoring.

Having just received the paperwork, I noticed that they are charging 21.1% APR (I'm paying monthly by Direct Debit) How can they do this?? I know that not all insurers charge APR (and have never paid it before) but they're trying to tell me this is a credit agreement. I disagree as I have not signed anything, only set my DD up over the telephone. Have I got any comeback please?

I'm soooo angry - these companies just take complete advantage!!:mad::mad::mad:

InsideInsurance

How do they take advantage? You are buying an annual product for an annual fee. You are saying you cannot afford/ dont want to pay it in one lump sum and so they are offering you an option of credit at a published APR. You then have a free choice if you want to accept that offer or either go with another provider and/ or use something like a credit card where you may have a lower APR.

Most people realise that 21.9% (which isnt that high compared to some insurers) is high and so choose to go a different route.

kingstreet

The monthly premiums you've been quoted include an instalment charge. As this is a credit agreement regulated by the Consumer Credit Act, the provider has to show the APR on the agreement form for your information.

You've already agreed to pay this charge included in the premiums.

_Quicklearner_

@InsideInsurance - they're taking advantage because it's not a loan. No credit has been provided. If I were to cancel my insurance, I wouldn't owe them any additional money except for perhaps the few days that might be left to cover to current period (month). They're also taking advantage because I wasn't advised of this on the phone when I took out the policy and handed my bank details over.

As I described before, I don't currently pay APR on my existing home and contents insurance ("it's charged at the company's discretion" as I was told by the customer service person). And I can't go another route for various reasons, otherwise I would have just done it and not bothered to post. Thank you for taking the time to respond.

Kingstreet - thanks for your reply too - but I haven't and didn't agree to pay these charges - the same call handler was surprised that I wasn't told when I took out the policy and agreed that I should have been. Hand on heart, my current policy does not charge me APR and as far as I can see there is no 'instalment charge' detailed on this or my last agreement but the APR is shown as a 'charge for credit.'

kingstreet

There's another thread about third party premium funding from earlier today.

https://forums.moneysavingexpert.com/discussion/3558437

Insurers offer instalment programmes by involving a third party to give them the money upfront. You then pay the instalments to them. It's possible that up to now, the premiums were paid directly to the insurer but they have now introduced the third party system.

When you take out such cover, a Credit Agreement should accompany the policy documentation to inform you of the cost of credit and the instalments and their due dates.

As mentioned, the APR is the notional cost of paying by instalments but this cost is included in the monthly premiums you've already been quoted.

You say you inherited this property and this cover. Is this the first renewal since taking it over? Did you receive paperwork at the point it became "your" cover?

InsideInsurance

_Quicklearner_ wrote: »

No credit has been provided. If I were to cancel my insurance, I wouldn't owe them any additional money except for perhaps the few days that might be left to cover to current period (month).

You are mistaken, it is still an annual policy even though you are paying monthly. There are a few providers that do do a monthly rolling policy with an annual review but this is an exception rather than the rule.

If you were to cancel mid term then you would most likely owe an administration fee of up to £50 and potentially additional premium, this again should be in the policy wording.

In cases of brokers and even some insurers you often will literally have been given a loan as it is a third party company that actually provides the credit. Again, just because you are paying monthly the broker still must pay the full premium up front to the insurer on your behalf (obviously net of their commission). Most brokers dont want to stomach that themselves so use companies like http://www.premium-credit.co.uk/insurance.html who give the brokers the finances up front and collect the monies from you. Depending on the APR the broker wants to charge there can be a profit share arrangement between the credit provider and the broker/ insurer.

If you look at the RBS stable of brands (eg Churchill or Direct Line) they are currently looking at 24.1% typical APR so your 21.1% isnt as bad as many.


That all said, if you did the insurance quote over the phone the agent that you spoke to should have explained to you the APR that was going to apply and if they failed to do so they are obviously in breach of the rules and you have cause for complaint. Almost every insurer/ broker records all calls so they can easily double check.

_Quicklearner_

Ok, it's all making much more sense now guys - third party company financing the policy. Shame the call handler couldn't explain that! Thanks again.

And yes, Kingstreet - the policy is totally in my name and I have the new papers. Thanks for checking though.