Drivers have been warned that they could end up £300 out of pocket if they pay for their insurance using a certain method.
As the cost of car insurance continues to rise, the Government has announced the launch of a new investigation to assess ways to prevent motorists from overpaying, particularly through certain methods.
Anadel Hoult, Chief Executive of the consumer group Which?, warned that whilst the cost of covering a vehicle is expensive for all motorists, there are a number of ways insurance companies make motorists pay more.
She explained: “With the cost of insuring a car at eye-watering levels, it’s no surprise many motorists dread the time for renewal.
“Which? research has highlighted serious problems with the motor insurance market, from unjustifiably high levels of interest from customers who pay monthly rather than annually, to widespread evidence of significant harm caused by insurers’ claims handling process.”
According to Which?, one of the most common ways in which drivers are overcharged for their car insurance is by paying monthly for cover.
Whilst motorists could see it as a way of avoiding a single hefty payment, spreading the cost allows insurance companies to add a significant APR rate. As a result, drivers could end up paying up to £300 more than they expected.
Many automotive experts recommend that drivers try to pay for their insurance in a single yearly payment or, if they cannot afford it, charge the cost to a credit card, with most having a better rate of interest.
When buying car insurance, drivers should also make sure that the details they put on their form are accurate to prevent avoiding costly admin fees for changes.
Sometimes referred to as adjustment fees, these charge drivers for making any changes to their insurance midway through a policy, with most motorists having to pay between £20 and £30 for each alteration.
According to Which? around a third of car insurance companies also charged a shocking £40 for customers who wanted to renew their policy.
In a bid to tackle high insurance prices, the Government has opened an investigation, hoping to discuss methods of reducing the cost of cover alongside a number of insurance firms.
They added: “Car insurance is an essential, not a luxury. It is vital to accessing economic opportunities and this Government is committed to getting costs under control.
“That’s why we’re taking direct action to bring insurance companies and regulators round the table to discuss how we can crack down on spiralling costs.”
