Elephant Car insurance - is this legal?

pablo_picasso_2

Here is a quote from an email I received from Elephant this morning about my car insurance renewal.

"I can confirm that if you choose to pay for the policy in a lump sum the premium would be £310.70. However if you wish to pay by Direct Debit the premium will increase to £397.70. The APR charged for thi type of payment plan, works in the same way an APR does on Credit Cards with each company setting their own rate of interest for repayments."

I had asked them to confirm this as I think the rate of interest is over 30% APR (once you take into account the montly payments coming out of the total balance) and I couldn't believe that this extortion was legal. Can companies charge over 30%, or whatever they want? In this case without even quoting the APR rate?

I consider asking payment of any kind of interest for car insurance to be a financial scam as the insurance is not used up 12 months in advance but consumed over the 12 month period bit by bit. So to be charged such a ridiculous figure, is there anything I can do to "persuade" them?

Many thanks,
Paul

raskazz

pablo_picasso wrote: »

I consider asking payment of any kind of interest for car insurance to be a financial scam

You are misguided then. How do you think insurers use premiums? Do you think they keep them all in a currrent account? No, they invest them to generate a return whilst keeping a reserve to cover imminent claims costs. The service charge on instalments reflects this reduced level of investement return and the risk of default and chasing payments.

lisyloo

I consider asking payment of any kind of interest for car insurance to be a financial scam as the insurance is not used up 12 months in advance but consumed over the 12 month period bit by bit.

The upfront premium they charge takes into account the fact that it will paid up front.

They are at liberty to charge whatever rates they like.
If you can get the money cheaper somewhere else, then don't take their credit.

dunstonh

consider asking payment of any kind of interest for car insurance to be a financial scam as the insurance is not used up 12 months in advance but consumed over the 12 month period bit by bit.

Wrong assumption.

Anon

That does seem very pricy - other insurers do offer a free payment plan or much less than this (a £ or so per month).

Simple - find a new insurer (and perhaps see if they will price match if this is the cheapest renewal quote). Remember you may also be able to get cashback through Quidco etc to bring your overall price down even more.

Anon