Significant burdens hide behind the payment option premium life in installmentsDimitris Spyrakos, a lawyer and doctorate, a former Consumer Secretary General and Secretary General of the “Union of Consumer Protection Law” with experience in criminal, private and consumer law, quotes in RES-EIA.
As he notes, many insurance applies up to 3% on the annual premium when this is not paid one -off, but without the real financial burden, which is often equivalent to excessive interest rate.
The hidden burden
The burden usually occurs in the general terms of insurance, but without revealing the actual cost of credit. For example, the 3% increase is applied even when the premium is paid in two six -month installments. In fact, credit is provided only for the second installment for six months, but the increase is calculated on the entire premium. Thus, the actual interest rate is launched to 12% or higher, given the “interest” advance.
Unfair and opaque practice
Mr Spyrakos points out that this practice raises serious issues of legality and ethics. Companies take advantage of the trust relationship with the insured, without any substantive credit risk, as they reserve the right to terminate the contract in the event of a delay. Most importantly, however, the consumer is not informed of the actual cost of credit, unlike both the principles of good faith and with the consumer credit legislation, as provided by Directive 2008/48 and the new Directive 2023/2225, which is to be implemented, which enhances transparency and transparency requirements. That is, in essence, consumers are led to the choice of payment in installments that would probably avoid if they knew the actual cost. In this way, insurance companies grant credit, silencing both the amount and the interest rate.
The need for transparency according to Directive 2023/2225
This practice, which is a remnant of previous seasons, must be abandoned, Mr Spirakos said, adding that the new directive provides that the companies providing credit must:
- clearly inform the consumer about the character of the credit,
- fully reveal its height and
- They publish the total actual interest rate (APR).
“Compliance with these transparency requirements not only protects the consumer, but also contributes to reducing the cost of credit for those who really need it, while enhancing the confidence in the insurance market,” concludes Mr Spirakos.
Source: RES-EIA