The Financial Conduct Authority (FCA) has launched a comprehensive competition market study to assess whether consumers who borrow to pay for motor and home insurance are receiving fair and competitive deals.
With premium finance rates ranging between 20-30%, the FCA is concerned that the current offerings may not provide adequate value for money, particularly for the estimated 20 million people who pay for their insurance in instalments.
Graeme Reynolds, director of competition at the FCA, said: “People rely on premium finance to spread their insurance costs by paying in smaller monthly payments.
“We want to ensure that competition works well and make it easier for consumers to find the best deals.”
Alongside this study, the FCA is also part of a newly formed Government motor insurance taskforce.
The taskforce will focus on identifying measures to stabilise or reduce motor insurance premiums, while ensuring appropriate coverage levels are maintained.
The FCA’s role will include analysing claims costs, handling arrangements, and the impact of rising insurance prices on various groups, such as younger drivers and those from lower-income or minority backgrounds.
On the FCA market study, Hannah Gurga, ABI director general, said: “We understand how crucial it can be for consumers to have the option to pay monthly, so they can manage their insurance costs.
“That’s why we launched our Premium Finance Principles earlier this year, which outline that any charges should be fair, transparent and reflective of the cost to the insurer.
“We will continue to work with our members on this matter and look forward to learning more from the FCA.”
