Direct Line, the insurance company, urged the government yesterday to crack down on anti-competitive practices in the home insurance market, saying they cost more than 2m buyers £33m a year. The company was using a report into the home insurance market to condemn mortgage lenders that fined customers for using other companies' home policies. It argued that the market was riddled with anti-competitive practices designed to deter consumers from shopping around. Direct Line found that insurance arranged through lenders could cost up to 30 per cent more than cover on the open market, and that 46 per cent of borrowers arranged policies through their mortgage banks.
Malcolm Cooper, home insurance business manager at Direct Line, said: "There's an overwhelming need for the government to take action and outlaw these practices once and for all. Consumers continue to be treated very shabbily by some mortgage providers. It's time there was a complete review of market practices and a ban on switching fees which are grossly unfair on consumers." Switching fees penalize consumers for choosing insurance with another company and Direct Line found that at least 22 per cent of the mortgage market was controlled by lenders who used the charges. They were often hidden in the small print of mortgage documents.
Another anti-competitive practice condemned by Direct Line was including insurance premiums in monthly mortgage payments, obscuring the price of the policy. Melanie Green, principal researcher at Which?, the Consumers' Association magazine, welcomed the report. "There's absolutely no justification for these kind of charges. It's just another thing which discourages people from switching." The Council of Mortgage Lenders said: "As long as there is transparency about mortgage offers, including the cost of any associated insurance, consumers can make their own choices."
Malcolm Cooper, home insurance business manager at Direct Line, said: "There's an overwhelming need for the government to take action and outlaw these practices once and for all. Consumers continue to be treated very shabbily by some mortgage providers. It's time there was a complete review of market practices and a ban on switching fees which are grossly unfair on consumers." Switching fees penalize consumers for choosing insurance with another company and Direct Line found that at least 22 per cent of the mortgage market was controlled by lenders who used the charges. They were often hidden in the small print of mortgage documents.
Another anti-competitive practice condemned by Direct Line was including insurance premiums in monthly mortgage payments, obscuring the price of the policy. Melanie Green, principal researcher at Which?, the Consumers' Association magazine, welcomed the report. "There's absolutely no justification for these kind of charges. It's just another thing which discourages people from switching." The Council of Mortgage Lenders said: "As long as there is transparency about mortgage offers, including the cost of any associated insurance, consumers can make their own choices."
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