Paying insurance monthly?...

vinnyfitz

I was wondering about paying my motor insurance monthly rather than in a lump sum at the begining of the year. (After all why should I give them next December's premium 11 months before they insure me with it?)
It turns out my insurer charges an 8% "service fee" for running a monthly direct debit operation. Which is a bit steep.

Does anyone know whether they all charge 8% extra for this?

If it is an administration charge I wonder why is it not a flat amount such as €10 per month rather than a % amount which penalises people with high insurance and often the greatest difficulty paying a big lump sum, even more.

ambro25

Don't do it if you can afford to...

Had a really nasty 'incident' with pay-monthly insurance about 3-4 years ago.

We cancelled a pay-monthly policy (they are usually based on a credit agreement, just like a personal/consumer loan) and the way this works is:
1) they loan the full amount from a credit lender (e.g. DirectLine)
2) you repay the credit lender (NOT the insurer) monthly
3) if you cancel at some point before the anniversary, they reimburse the balance to the credit lender (e.g. 12 months credit - 7 months insured then cancelled - the insurer pays the lender 5 months back, everybody's happy).

As we were changing cars and the current insurer was not competitive, we gave notice within the term (2 weeks in writing), still had 6 months on the policy. No probs, the insurer forwarded proof of ncb and all that, BUT... went belly-up BEFORE paying the lender back.

We had cancelled the direct debit after the insurer had -at the time- confirmed all was in order and actually gave him/the lenders 1 month over-payment to 'ensure' smooth termination... then we started getting 'nasty letters' from the lender, the first we knew anything was wrong with the insurer.

Turns out we were liable to pay the full 12-months balance of the credit agreement to the lender, even though it was for nothing (no insurance/no car to insure) and not our responsibility to pay, since we were within the terms of both contracts. The insurer going belly-up and not reimbursing was not their problem.

I fought these b***ards tooth and nail all the way, but eventually had to settle since they had issued proceedings against us for "defaulting" and had opted out of any possible arbitration (easier to hit the small guy, ya see :mad: ).

As I said - be extra, extra-careful with the small print. Needless to say, I have never, and will never, ever again go through this type of arrangement.

vinnyfitz

ambro25 wrote:

Don't do it if you can afford to...

Had a really nasty 'incident' with pay-monthly insurance about 3-4 years ago.

That sounds pretty unusual and very unfair. Even at this late stage you might have redress through IFSRA. BTW I did not know any Irish insurance co. went wallop in the last few years. Who was it?

Anyway, surely this is not how it works with most insurers? I mean its nothing to do with a loan. Effectively what we are all doing is lending the insurers part of our premium almost a year in advance.

ambro25

Wasn't IE, was UK.

Totally unfair indeed, but what was the choice? Risking a credit/finance CCJ judgement against me & being black-listed (even though perfectly in my rights at the time in respect of contract terms - it's still a 50/50 process :mad: ), or just standing my ground on 'principles'?

You don't get nothing for free, far as I know - especially with insurers ( - the worst kind after the toad, solicitors come in 3rd ). Do check the pre-contractual terms and any 'credit agreement' (even if it's not headed as such) amongst the parework.

It's pretty rare for insurers to be credit brokers 'as well', easier/cheaper/risk-free for them to factor it out to specialist lenders. They make less margin, but don't have to deal with defaulting payers (the lender's recovery agency does that cheaply, couple of warning letters, final notice, small claims court proceedings) + can offer 'advantage' of the facility to clients as a selling point.

Insurers make their margins not so much with the amount they charge for premiums, but with the interests they accumulate from paid-up premiums preferably before they have to pay back out some against claims.

My two cents, but I'd ask if I were you...

aodh_rua

At 8%, you're better off getting a bank loan. It'll still be monthly repayments, but the interest will be lower. I did that with my first policy (a hefty €3800 tpft on a provisional) and it worked out nicely.

D!ve^Bomb!

yeah i just finished paying monthly installments.. i'm all happy now as i have nothing more to pay for 6 months:D.. but when i have to renew my insurance i'm just gonna get a credit union loan and pay in full.. it's less hassle and less pressure to come up with the money every month

John R

AFAIR AXA have an in-house installment plan. It is a few years ago that I had a policy with them (PMPA then) but it was something like 6 payments totalling the full policy over the first 6 months, there was a small fee (€10 or similar) but no interest.

uberwolf

I recently got a similar shock, applied online qouted one price, elceted to pay monthly and it was only when I received the paper work that my attn was drawn to the increaed cost of that method of payment. Only had a week to get it sorted as well or be stuck with it. Twas all coming out of my student laon for the year so it was cheaper to pay BOI interest rate than QDs.

egan007

Come on everyone - do your maths
You should not need to be told to shop around for credit these days.
If you want to pay it off then get a cheap interest rate loan from the bank

vinnyfitz

egan007 wrote:

..
You should not need to be told to shop around for credit these days.
...

But you see - it is not a case of credit. Instead we are lending money to the insurance companies when we pay once a year in advance.

Anyway, my question is which companies have the best deals from an instalment point of view? So far it sounds like AXA are worth checking out. It is Allianz who charge the 8% "service charge" BTW.

drive3331

In reply to vinnyfitz should the view be that insurance companies are selling a product (ok it only lasts a year) and by paying for it up front your buying it outright.
By paying monthly your still buying the same product, same life span but now paying 8% to facilitate what is essentially a credit agreement for the 12 months

unkel

egan007 wrote:

Come on everyone - do your maths

Indeed. 8% service charge effectively means an interest rate of about 16%. You can do much better by getting an overdraft / loan from your bank or building society

Even better, pay for it by credit card and then pay the credit card of with the loan when the balance is due. 50 days interest free first

mike65

Its one of those "more money than sense" options! Pity cos it would be handy but the insurance companies are clearly using the feature to boost margins.

Mike.

jlang

There was a scam a few years ago with monthly payment insurance. A young gurrier would get his insurance from Quinn Direct or whoever and they'd give him a disc for the year. After a month or two he'd stop paying, but still have a disk to show the guards if he was checked. QD would be happy as they got their few months money (at a rip off price + the 8%) and he'd be happy too. Of course the guy wouldn't be insured at all but that didn't catch up on him till he crashed.

Not sure what they did in the end to stop it, but I haven't heard of anything like it for several years. Maybe there's no young gurriers anymore.

Victor

jlang wrote:

There was a scam a few years ago with monthly payment insurance. A young gurrier would get his insurance from Quinn Direct or whoever and they'd give him a disc for the year.

Maybe they only issue the disk for the period paid for or the banks are a little quicker than QD in saying "'ere, you owe us money."