Car insurance providers must clarify direct debit fees

Independent financial research company Defaqto has published its comprehensive annual report on the motor insurance industry, which addresses the challenges currently facing the sector. Among its findings, the report urges motor insurance providers to clarify the direct debit fees they charge customers.

Many customers choose to pay for their car insurance by monthly instalments, particularly if the premium is high. The average fee that providers charge for this in 2010 is between 8% and 11% of the gross premium. However, for 8% of the total policies on the market, the fee charged by providers was not stated.

Mike Powell, author of the report and Defaqto's Insight Analyst for General Insurance, said: "What should be a concern for the industry is the number of policies where the level of fees to be charged is unclear to the consumer. Professional researchers sometimes struggle to find this information, so what chance does an uninitiated customer stand?"

These charges come in addition to a rising proportion of motor insurance policies also charging adjustment fees, duplicate document fees, cancellation fees and renewal fees.