Consumer Intelligence has welcomed the Financial Conduct Authority’s (FCAs) premium finance market study update, saying it backs up the research it published in April.
The FCA highlighted that nearly half (48%) of motor and home insurance policies used premium finance in 2023.
Consumer Intelligence’s data found that use of instalments jumped by more than 10% in both motor and home insurance between 2022 and 2024, with over two-fifths of consumers in the UK now paying monthly.
The FCA said annual percentage rate (APR) for premium finance usually sits between 20% and 30%, but almost 20% of customers pay more than 30%.
Consumer Intelligence found APR can be misleading on its own.
The FCA noted that consumers focus on the total cost of insurance and finance together, making total instalments cost the most accurate way to measure what people actually pay.
Furthermore, the FCA found that more than a third of home insurance customers pay the same for monthly payments as annual, compared to less than 3% of motor customers.
Consumer Intelligence’s data confirmed the average total instalments cost is lower for home insurance at 8.1%, compared to 10.1% for motor.
Additionally, premium finance was found to make up about 20% of non-core revenue for both intermediaries and insurers.
Admiral reported £255m from instalments and admin fees in 2024, up 55% on the year before.
The FCA pointed to concerns about “double dipping”, where choosing monthly payments can push up the underlying insurance premium.
Consumer Intelligence found that some insurers use monthly payment as a rating factor, which can increase costs for those who pay in instalments.
The FCA said it is not currently planning to cap APR, force 0% APR or ban commission.
Instead, it will focus on challenging outliers and making sure pricing is fair.
Ian Hughes, CEO at Consumer Intelligence, said: “The FCA’s latest report validates what we’ve been observing for some time: the Annual Percentage Rate (APR) alone doesn’t tell the full story of what consumers pay for insurance instalments.
“Our Total Instalments Cost (TIC) metric cuts through that complexity, providing the true picture. In a dynamic market, understanding your competitive position by TIC – not just APR – is crucial.
“Our data enables insurers to precisely determine their market position within the quartiles, identify opportunities, and ensure they’re delivering fair value under the Consumer Duty.
“We are delighted to see the FCA’s focus on areas our data already covers in depth.”
