Price loading for paying by installments

tabby aspreme

Is this new ? I recently got a renewal quote for €800 from Aviva, it stated in the document that payment by installments carried a loading like Age, NCB etc, and if I chose to pay by installments the cost would be €1050 plus a 7% service charge.

Del2005

When you pay by installment you are taking a loan from the insurance company. They can charge interest on this of they want.

L1011

Its generally interest on a loan arranged with an in-house finance place, and has been the norm for decades.

tabby aspreme

There's more going on here than just interest charges, what's the APR , to add €255 to a € 798 loan

FishOnABike

If you add on the 7% service charge it is 40% more expensive to pay by instalments than in a single payment, and that's over 10 months, so the effective 'interest' rate is even higher!!!

TheCrank

I used to work for Aviva and remember this being introduced something like 15 years ago. Yes there is an APR, but there is also a direct loading based upon insurance risk because they found that people who pay by installment are more likely to claim. I have no proof of this, just a memory of it coming up in a meeting with an underwriter. I believe there was also a problem with people claiming in the early days of the policy and then stopping the direct debit.so

You can verify this by generating a quote and looking at the gross premium within the premium breakdown. The gross will be higher in the instalment option. Gross premium is used by the insurance company to hide the loadings that they don't want you to see. When premium breakdowns were made mandatory by the consumer protection code insurers moved certain loadings into the gross premium (the gross is the first number shown to the customer but there is lot going on to generate it). This was done to hide their pricing structure from competitors and had the happy bonus of keeping the customer in the dark.

tabby aspreme

https://www.boards.ie/discussion/comment/120821331#Comment_120821331

Yes it would be a 64% interest rate over 10 months without any service charge, so definitely a loading

L1011

When it gets to that interest rate, it makes sense to look at a credit union loan for a few months or even doing credit card over a few months - not something that would normally be recommended for anything else.

The huge risk with not paying a credit card in full is getting used to using it as extra expenditure and paying huge interest every month.

The extra cost to pay monthly for insurance, quarterly for car tax etc etc all falls in to the general problem of being punished for not being rich. When you have money you can spend less money on stuff in so many cases.

Eggs For Dinner

As mentioned above, Aviva consider paying by instalments to be an underwriting factor affecting risk. It is separate to the interest charged for payming by DD

dasa29

This is what my AXA renewal had for paying by instalments which added up to €443.65 rather than €419.70 for paying by credit card.