Significant hidden costs are embedded in life insurance premium installment plans, according to Dimitris Spyra kos, a lawyer and legal scholar, former Secretary General for Consumer Protection and current Secretary General of the ‘Consumer Law Protection Union,’ with extensive experience in criminal, civil, and consumer law. He warns that many insurers apply surcharges of up to 3% on annual premiums when payments aren’t made in full upfront—without clearly disclosing the true financial cost, which often equates to an excessively high effective interest rate on installments.
These hidden charges typically appear in general insurance terms but fail to reveal the actual credit cost. For instance, a 3% surcharge may be applied even when premiums are paid in two semi-annual installments. In reality, credit is extended only for the second payment over six months, yet the surcharge applies to the entire premium. This inflates the real interest rate to 12% or higher, especially when considering prepaid ‘interest.’
Spyrakos emphasizes that this practice raises serious legal and ethical concerns. Insurers exploit the trust relationship with policyholders despite facing minimal credit risk, as they retain the right to cancel policies in case of late payments. Crucially, consumers are not informed about the true cost of credit—violating principles of good faith and existing regulations such as Directive 2008/48 and the new Directive 2023/2225, which strengthens transparency and responsible lending standards.
In effect, consumers are steered toward installment options they might otherwise avoid if fully aware of the real cost. Insurers thus provide credit while concealing both the amount and the interest rate.
Directive 2023/2225 marks a turning point. It requires companies offering credit to:
– Clearly inform consumers about the credit nature of installment plans,
– Fully disclose the total amount charged,
– Publish the overall effective annual interest rate (APR).
“Compliance with these transparency rules doesn’t just protect consumers—it also helps reduce credit costs for those who genuinely need financing, while boosting trust in the insurance market,” concludes Spyra kos.