Car Insurance Monthly Payment Costs Fall, Saving £157m
FCA finds interest rates on monthly insurance payments have dropped 4.1 percentage points since 2022. Typical motor policy saves £8 per year in finance charges.
Car buyers paying monthly for their insurance are benefiting from significant cost reductions, with consumers saving around £157 million annually according to the FCA. Over half the firms reviewed by the regulator have lowered their premium finance charges following a market study.
Interest rates for premium finance have fallen by an average of 4.1 percentage points since 2022, translating to savings of £8 per year on a typical motor policy and £3 on home insurance. The reductions stem from regulatory attention, fair value assessments and base rate cuts.
Firms identified as highest risk saw even steeper cuts, with APRs reducing by 7 percentage points on average. These changes saved customers £14 annually on typical motor policies and £4 on home cover. The improvements follow direct engagement from the FCA under Consumer Duty requirements.
Graeme Reynolds, director of competition and interim director of insurance at the FCA, said: "For millions, paying for insurance monthly is not a choice: it's a necessity. We found that competition in the market is meeting the needs of many consumers. But where we found issues, we used our Consumer Duty to get people fairer value."
In 2023, nearly half of motor and home insurance policies - approximately 23 million - were paid monthly, often because customers couldn't afford annual payments. The FCA confirmed it won't introduce price caps or mandate interest-free premium finance, as this could restrict access to cover for those who can only afford monthly payments.
