Personal Finance Industry Insight

Welcome to the April 'Personal Finance Industry Insight' newsletter from experts at uSwitch.com which now also includes insights into the Insurance Industry.

In this edition, you will find an overview of industry activity from product launches and developments, to regulatory changes, industry announcements and market trends.

Predictions - PF: Default charges on current accounts: With the continuing investigation of current account default charges by the OFT we predict that this continuing probing will lead to the end of "free banking".

The introduction of banking fees will clearly be a catalyst for one of the biggest ever shake-ups in the current account switching market.

Predictions - Car Insurance: Greater push towards eco car insurance - is it just a marketing ploy? With More Th> n and CIS Insurance offering discounts for greener cars, companies such as Direct Line are refuting the claim saying that it is just a marketing ploy as all insurers should recognise those cars which are more CO2 friendly.

uSwitch.com believes that motorists should always shop around as you may be with a company which has not yet added 'green cars' to its rating engine, so you may get further discounts by shopping around.

Insurance comparison sites - helping the consumer! As more people than ever are now online, more insurers than ever are increasingly using the Internet as a source of customer acquisition.

Seeing the value that sites such as uSwitch.com provide to customers, many other media and insurance companies are investing in car insurance comparison services.

uSwitch.com sees this as a positive move for the insurance industry as it will continue to make the market more transparent for consumers.

However, uSwitch.com warns about using sites that do not make it clear how they earn their money as some sites will not use best practice standards and could provide misleading or inaccurate information which will cause problems in the event of a claim.

Speeding vs.

Mobiles? Insurers are placing less emphasis on speeding convictions, but are warning of the increased cost of being convicted if caught driving whilst using a mobile phone.

Nick White, Director of Personal Finance, at independent price comparison and switching website, uSwitch.com, comments: "The spotlight this month has been shining on the consumer backlash against bank charges - including credit card fees.

The OFT has announced that it is looking into the issue of default fees, but no decision will be taken until the end of this year, which means that consumers have more time to ensure they claim back these excessive charges now before it is too late - and before banks change their terms and conditions to avoid paying back any future claims.

"It has been clear that banks have been looking for different ways to recoup this money by charging customers for using their credit cards, and even for not using their cards as we have seen fees brought in for 'inactivity'.

Fees for taking cash out of machines on your credit card and for using your credit card abroad have been steadily rising so it is now more important than ever that consumers pay attention to the rates that they will be charged, and ensure that they are getting the best deal." Aron Thompson, Head of Insurance, at independent price comparison and switching website, uSwitch.com, comments: "The online insurance comparison market is really starting to hot up with the launch of new insurance comparison sites.

With the recent announcement by the Department for Transport that motor insurance certificates will be issued electronically, this can only help to fuel the growth of insurance being purchased online.

You only have to look around you on the underground or even on TV to see insurance comparison sites are starting to advertise in the same spaces as traditional insurers.

This is a clear indicator that comparison sites are becoming increasingly present on the consumers list of sites to visit when looking for car insurance online." "We have also seen the introduction of conviction codes for using a mobile phone whilst driving.

uSwitch.com is 100% behind initiatives which create a safer driving environment, not only for those travelling by car but also for pedestrians, who can be the innocent victims of accidents caused by careless driving." Product changes and developments - PF: Personal loans: LV has increased the online rate from 6.4% APR typical from £10,000 - £25,000 to 6.7% APR typical for loans from £9,000-£25,000.

Halifax has increased their online rate from 6.1% APR typical from £7,000 - £25,000 to 6.9% APR typical for loans from £7,000 - £25,000.

Moneyback Bank has reduced the Loan advance from £3,000 - £20,000 at 5.9% to £7,500 - £20,000 at 5.9% and £3,000 - £7,499 at 6.4%.

Northern Rock has cut their loan rate from 6.5% to 6.4% APR typical for loans from £1,000 - £25,000.

Tesco Personal Finance has reduced their loan rate from 6.9% to 6.7% APR typical for loans from £7,500 - £25,000.

Credit cards: Egg cash rates have gone up from 22.9% per annum to 23.9% per annum; they have also changed the order of repayments on their credit card.

Lloyds has also raised their cash rates from 19.51% per annum to 27.9% per annum.

Barclaycard has re-priced their Card Protection Insurance from £20 to £29.

Current Accounts: Barclays have introduced a new additions account (opt C) for customers to be entitled to these accounts they must provide a minimum funding of £1,000 each month.

Industry Announcements: CapGemini's World Retail Banking report released: Banking in Britain is cheaper for the consumer than both Europe and North America despite far higher penalty charges, according to a new global survey of the industry.

The average annual cost of banking for consumers was euro71 (£48) in the UK last year compared with euro77 globally and euro72 in North America and Eurozone.

However, half the cost in the UK comes from "exceptions handling", such as overdraft charges.

OFT Default charges: The OFT announced on the 29th March that it was aware of consumers' concerns about the level of fees but a flat cap on them would be impossible because of the different ways banks and building societies run accounts.

The OFT stated that more detailed investigation was needed to work out how charges could be made fairer without account providers simply adding new fees.

The OFT is to announce full details of its investigation in April and is expected to publish a final report by the end of the year.

DFES Research: New research carried out by the Department for Education and Skills (DFES); found that many aged between 16 and 21 do not know the meaning of common financial terms.

The study showed that 40% of people in the age group 16 to 21 are unaware of the meaning of an APR, while 25% believed that store cards offer better value then credit cards.

APACS announced that the UK's BACS system had been running slowly: It was estimated by BBC money that up to 400,000 people will not be paid as expected as a result of a problem with the banking system.

APACS has since announced that any consumer that receives a default charge would be refunded these expenses.

TK Maxx Hackers stole millions of credit card details: It has been said the 45.6m credit card numbers were stolen in 2005, and it has identified at least another 132,000 taken in 2006, although that figure may be an underestimated.

This has been described as the biggest ever credit card security breach.

Uswitch.com consumer studies and reports OFT Default charges: New research from uSwitch.com showed that 18.96 million people have been hit by banking charges, totalling £4 billion.

It was revealed that over half (52%) have still not managed to claim the money back.

Many customers declared that a "fair" sum for a bank charge would be on average £4.07.

Analysis of these figures was able to show that if the banking charges were to fall to this level there would be a decline in revenue of 84%.

Banks are currently making a profit of ?4 billion and this would fall to £646 million.

Cash Rates: On 31st May 2005, the Department of Trade and Industry (DTI) reforms to the Consumer Credit Act 1974 came into force.

One of the key changes was to restrict the use of APRs in advertising and customer literature to the main purchase rate on credit cards.

All other rates, including cash advance rates, were to be displayed as "per annum" rates, which do not take account of any associated charges and fees or compound interest.

As a result of the changes to the way in which cash rates must now be displayed, in some cases they appear to have gone down since May 2005, when in real terms they have increased.

For example, the Halifax One Visa displayed a cash withdrawal rate of 25.4% APR in May 2005, whereas in March 2007 this rate is being displayed as 22.9% per annum- a decrease of 2.54%.

In fact, the rate is the equivalent of an APR of 26.09%.

Charity credit cards: uSwitch.com also reported on charity credit cards and warned that consumers and their chosen charity could be getting a lot less than they bargained for.

We advise consumers to opt for a cashback card which offers a greater reward for their money.

Innovation Call centres: Lloyds TSB has announced that they are moving call centres back to the UK from a service centre in India.

The bank will even allow all of its current account customers to ring their local branches instead of a call centre in India - a move previously adopted by Natwest.

At the height of the dotcom boom there were even predictions that bank branches would close but this trend has been reversed as of late.

Nationwide also pledged that it is committed to call centres in the UK.

Move to stop customers attempting to claw back high overdraft charges: Barclays and HSBC have changed the terms and conditions on current accounts, so that the £25 charges made when an overdraft limit is exceeded will instead be called "Arrangement Fees".

First Direct will also follow suit from next month.

Experts say the new wording may mean that any future claims against penalty charges will not be valid.

Halifax: is to launch a new Christmas current account at 5.2% aimed at Low income households.

Car Insurance: Product changes, developments and innovations The Department for Transport has announced plans to enable motor insurance certificates to be issued electronically.

Currently the law requires these certificates to be sent by insurers to policyholders by post.

Motor insurance certificates are legal evidence of insurance, and are needed when arranging road tax, MOT and by the police.

The ABI (Association of British Insurers) has called for a one-year minimum learning period for learner drivers, and limits on the number of passengers for young newly qualified drivers.

Young drivers make up an eighth of all license holders, but are involved in a third of all road accidents.

Road accidents are now the biggest killer of 15 - 24 year olds in the UK.

Mobile Phone Convictions: Leading insurers estimate that 10,000 drivers will be caught using their mobile phones while on the move this year pushing more motorists into the non-standard car insurance bracket which in turn will prompt a rise in insurance premiums.

CIS Insurance Services: Government statistics recently released show that in 2005 1,297 people died and a further 11,535 were seriously injured in crashes involving a driver or rider aged 15 to 25 which equates to 35 deaths and serious injuries every day.

Insurers are concerned that a whole generation could become uninsurable if nothing is done to halt the number of young motorists killed or seriously injured on UK roads which could add to the UK's uninsured driving problem.

Tesco Planning Finance Comparison Website: Tesco Personal Finance and Royal Bank of Scotland are said to be planning the launch of a price comparison website amid concerns that existing sites are having an adverse effect on the sale of insurance and credit cards.

Newspaper reports suggest that Sir Fred Goodwin, the RBS chief executive, has given the go-ahead for the site in conjunction with its Tesco partner and that it will be rolled out in the next few weeks.

Goodwin is said to be rattled by the impact of online price comparison sites.

Uswitch.com consumer studies and reports: uSwitch.com compiles the 'league of Claim Shame': Russian roulette for innocent drivers.

When it comes to overall 'Claim Shame', Bristol takes pole position.

The city has the highest number of drivers with endorsements on their policies for driving while under the influence.

A total of 4,858 licence-holders in Bristol have a drink-driving conviction (2% of all policy-holders).

This compares with bottom-of-the-table London, where just 1.06% of policy-holders hold a drink-driving conviction.

Bristol also takes third place for policy-holders with a speeding conviction, 67,006 (27%), pipped to the post by Nottingham where a staggering 30% have a conviction for speeding.

Bristol also performs badly when it comes to police statistics.

Of the cities included in the study, Bristol was second overall for reported vehicle thefts (8.6 per 1,000 of the population) and third for thefts from a vehicle (23 per 1,000 of the population).

For more information visit uSwitch.com or call 0800 093 060.

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