This seems strange to me. Surely it’s no odds to the insurance company once I pay whatever credit surcharges are due.
Does anybody understand why my personal fiancial arrangements might impact my driving?
Is this just a case of the Motor Tax guys do it so can we?
by ruscaire
30 comments
Is there anything that you can choose to pay annually or monthly where the annual payment isn’t cheaper than the sum of the monthly?
Yes mate, everyone knows things are generally cheaper when you can pay the full amount outright. Cars, insurance, furniture, property……..
You new here?
It’s not right (and this loading should be banned)
But only possible reason I can see is,the cases where people get insurance and disc,then cancel the direct debit leading to uninsured drivers…..your being punished for someone else action
If you insure me for the year, I crash on week 3 and write off my vehicle. You pay out full amount minus the excess. Do you think I’m going to pay the remain 11 payments for a car that can’t be on the road?
Bit of advice op – saying slan and bye to every comment you get that you disagree with will make people not want to answer you.
This is pretty standard. There is a time value to money. Anyone with basic financial literacy knows this. Why would anyone pay for anything up front if they can get it for the same price but spread out over a year?
There is also probably some other underwriting statistics that back up the higher payment over time model. Examples: Fraud (cancelling payments after receiving insurance disk), non payment of premium after a crash (cancelling direct debits) and maybe even some higher payout averages for those that can’t pay all in one go.
You’re seen as more risky to an insurer if you pay month to month versus yearly. From the insurer’s perspective they have to consider why you *wouldn’t* pay it out yearly. If you don’t have the money in the bank for a yearly payment, use a credit card and pay that back as best you can. See if the credit card charges eclipse the monthly payment difference for insurance versus yearly, as an example.
This is like the basics of insurance. To an insurer, if you buy a yearly-paid policy it implies you’re confident enough that you won’t have any insurance-related issues for that year. If you pay monthly, it either means you will or you’re shopping around constantly. Which is a risk factor to them.
The short and simple answer is that people who pay monthly are a statistically larger risk than those who pay in full and upfront.
They statistically get in more crashes and cost more money to the insurer.
This is not a credit surcharge, it’s a risk loading based on the statistics.
That’s how most recurring services work. It costs a business more to process 12 payments vs 1.
Yeah the insurance cartels an do what they want unfortunately, the market needs to open up
Paying monthly involves extra costs and inflation eats away at 12 monthly payments, especially towards the end of the year. €120 today is worth more than €120 in drips and drabs over the coming year, as there’s little chance of the insuree going into fault and the insurer gets to earn interest on it or to improve their cash flow.
Trust me insurance companies would far prefer if they could get people to pay monthly. If they did they wouldn’t have to send renewal reminders and you’d just roll over into the 2nd year which means retention would be higher. Current status is if you pay upfront you have to actively go and renew your policy which opens the opportunity for people to switch as they see the new cost of premium etc after a first year discount.
Insurance companies have crunched the numbers though and seen that people who pay DD typically have higher claims and therefore need to pay a higher premium
So a rating factor is how they determine how much you pay based on your risks. By paying montly is means your factor is rolling by month and not by year. So your risk it to end up having a premium increase month to month based on how you drive instead of year to year. If you end up with points on your license or even change job to a higher risk job one month your risk factor changes. Also to insurance companies montly payments in of themselves are a risk that increases your risk factor, such as if you miss a payment one month so they stick on an increase. Hence why paying monthly costs more than paying yearly.
Dome of the things that can reduce your risk factor is how many years of driving with no claims, your age, the age of your car, being married, and also having more than one named driver for your car (as their risk factor is taken into account then).
A lot of people haven’t understood the message. It is expensive because there is interest on the payments; but in addition to this, paying on finance makes you a higher risk customer based on financial planning, decision making, likelihood of deferring maintenance etc. and this also increases the premium.
Where was this stated?
I don’t believe that is a rating factor. it’s typically an interest charge from a third party credit provider or a service charge as it costs money to run a dd facility.
I would consider this to be a false / misleading statement. I don’t know how it would be possible to say you are more risk when you pay by dd. People just have different attitudes to how they like to pay things.
Paying monthly costs more.
Costs more to process payments.
Rewards people paying up front.
Are you new?
According to the Irish insurance cartel, breathing air or drinking water is related to your risk as a driver. And sure what can they do but add more to your premium. The poor mites.
123.ie not surprised. Used to work for them and they had a lot of weird rules.
You could live on the highest mountain in Ireland, but if you house or street name had any reference to water in it, no flood cover would be offered.
They also decided to charge anyone with a foreign sounding name extra, as apparently claimed more often.
I didn’t stay there long.
Same in the US. If I pay all of it up front, I save significantly. But it’s $1200 every six months. Not everyone has that just lying around.
Sure you can “save” the $200 every month and be ready to pay it but that’s quite the chunk of change.
I live in Sweden and my Car insurance is for a 2007 auris is about 20euro a month and it doesn’t cost me more to pay monthly as far as I can recall. I have had my license for about 4 years.
I’ve never seen this on my insurance and I always pay monthly. The extra cost is a credit handling charge. This must be a company specific thing.
Same with health insurance. It’s like a tax for not being able to afford the years fee in one go.
The companies are just greedy and want to get all the money as fast as possible.
This is incredible they can do this. Maybe they can justify it if you’re a new policyholder with this company and have had an accident in the last 5 years but all in all a very shady practice.
Most insurance charge you more as interest for financing it, having it effect your insurable rating however is stupid
And paying all at once will incur a convenience fee.
That’s standard for nearly every payment you decide to spread out? It’s always more
It’s a ‘Poor Tax’.
Yes
In Ireland everything works like that if you spread the cost, with the possible exception of school ‘voluntary contributions’ (at least in our schools). Road tax, Insurance, energy bills, fines, management fees, the list goes on.