Which? calls for ban on motor insurers charging ‘poverty premiums’ of as much as £370 a year
Which? is calling on the government to ban insurers from charging a ‘poverty premium’ on pay-monthly motor insurance policies, after finding some providers charging interest rates as high as 53 per cent to customers who can’t pay upfront.
Premium finance is a loan on insurance, offering customers the option to pay for their policy in monthly instalments rather than annually. An estimated 15 million UK customers use premium finance to pay for motor insurance, and many under financial pressure do so without choice, despite the policies often costing more overall.
The consumer champion launched a mystery shopping investigation, collecting premium finance quotes from 30 motor insurance providers to assess premium finance deals on offer following a two-year Financial Conduct Authority (FCA) market study that Which? believes didn't intervene nearly enough to prevent firms from charging seemingly excessive interest rates.
Which? found five insurance providers offering what it considers extortionate rates, since they are well above typical credit card APRs on policies. The highest APRs came from City Insurance (53 per cent), UDrive Cover Ltd (50 per cent), Sterling Insurance (38 per cent), Rightsure (34 per cent) and Acorn (33 per cent). City Insurance told Which? it is currently in the process of reducing its APR to 36 per cent.
In cash terms, these figures represent as much as £367.75 added to a customer’s annual motor insurance bill, turning a £2,583.23 annual policy from Rightsure into a £2,950.98 one.
The median APR across all 36 quotes analysed in the mystery shopping investigation was 26.2 per cent. As of October 2026, the median credit card APR (across the whole of the market) is just 25.9 per cent. Which? believes this is unjustifiable when the FCA itself has declared that premium finance is lower risk than other forms of credit because providers can ultimately cancel policies if customers miss payments.
Household names Santander and the Post Office were among the firms offering APRs higher than typical credit cards. Both charged premium finance customers 26.5 per cent APR, adding £70.51 and £92.07 respectively to the annual price of their policies.
Driving is essential to daily life across the UK, with 67 per cent of people relying on cars to commute to work, while many others depend on them for shopping and school runs. Motor insurance is legally required to drive, so its affordability is vital to help motorists tackle the high cost of living.
Following the recent re-introduction of the £2 bus fare cap, Which? believes action on car insurance interest rates is the way to give motorists similar breathing room.
The consumer champion found a further nine providers charged APRs between 25 and 30 per cent. 14 providers charging interest had APRs of under 25 per cent. Only two insurers, Marshmallow and Motorcade, charged 0 per cent APR, though this does not mean they were the most affordable providers overall. Two providers also failed to provide APR quotes despite offering premium finance.
Of the insurance providers Which? assessed, Quote Detective added the most to its quote - proportionally - for paying monthly. Its total monthly cost of £1,756.03 was £244.76 (16.20 per cent) higher than the annual premium (£1,511.27). An APR figure wasn’t provided as part of the online quote.
These latest findings come despite years of regulator scrutiny of the premium finance system. The FCA’s market study and a government motor insurance taskforce, both launched in October 2024, sought to tackle soaring insurance costs for cash-strapped consumers, with the Government deferring to the FCA for proposing reforms to the premium finance market.
The FCA concluded its market study in March 2026, ultimately ruling out a price cap or ban on charging interest for pay-monthly policies.
The regulator claimed that its current rules were sufficient to address cases of poor behaviour among insurers, citing falling interest rates since 2022 that amount to an average £8 annual saving for motor finance customers. It also directly challenged several firms charging interest rates averaging 37.6 percent, expressing satisfaction with an average reduction to 30.5 per cent.
While this was a step in the right direction, the latest Which? research demonstrates why the regulator needs to intervene more significantly in the market.
Despite the financial regulator’s former head of insurance branding premium finance a “tax on being poor,” the FCA’s probe appeared to give the green light for firms to keep charging rates of up to 30 per cent. Which?’s investigation suggests that firms are successfully charging even higher rates without consequence.
Unaffordable insurance is not just a consumer issue - it affects the wider economy. Citizens Advice data shows hundreds of thousands of the consumers priced out of driving in recent years have had difficulty finding and travelling to work. FCA research also shows that young motorists, single parents and renters are more likely to use premium finance products than the average UK adult.
Average profit margins for premium finance have far exceeded those of insurance premiums. In 2024, the FCA found that the average profit margin for insurers’ premium finance was 31 per cent. This compared to just 3 per cent for motor insurance policies, according to EY. The FCA investigated insurance intermediary brokers’ profit margins further, finding that these averaged 57.5 per cent when unrelated costs were excluded.
It’s clear that competition is failing in the secondary market of premium finance, leaving many consumers with little choice but to pay what Which? believes to be exorbitant prices to access essential insurance. That’s why Which? is calling on the Government to ban motor insurers from charging extra for monthly payments, alongside introducing a requirement for motor insurers to offer a pay monthly option. This would maintain access to this vital payment method while establishing a fairer and more competitive market that bears down on the total cost of insurance.
The upcoming Budget provides the perfect opportunity for PM Andy Burnham to make this the latest intervention in his “breathing space” agenda to ease the cost of living. Ending penalties for paying monthly will help improve access to motor insurance, ease financial pressure on households struggling the most and support economic growth by making it easier for people to get to work.
Rocio Concha, Director of Policy and Advocacy at Which?, said:
“Too many consumers have already been pushed out of driving or into financial peril because of these unfair pricing practices that we’ve found can charge less wealthy customers more.
“Our latest investigation exposes the consequences of the regulator shying away from its responsibility to ensure competition works for consumers.
“The Prime Minister has pledged to create more ‘breathing space’ for consumers, and that’s why we’re urging him to use the upcoming budget to announce a ban on two-tier pricing for motor insurance. We believe it is the best way to create a fairer, more competitive system that doesn’t punish the customers least able to pay.”
-ENDS-
Notes to Editors:
Useful links
- Which?’s full Budget submission
- Which?’s first investigation on premium finance in the motor insurance industry
- DfT: Transport Statistics Great Britain: 2024 Domestic Travel
- FCA: Premium Finance Market Study Final Report
- FCA: How and why Consumers Use Premium Finance
- Citizens Advice: Driven Apart The unequal impacts of high car insurance costs
The FCA’s Premium Finance Market Study was launched in October 2024 alongside the Government’s Motor Insurance Taskforce. Although both initiatives sought to identify and address the causes of high insurance premiums, the Government entrusted the FCA with tackling premium finance specifically.
It found that average APRs on premium finance products had dropped 4.1 per cent between 2022 and 2026, representing a saving for motor finance customers of £8 per policy, per year (£157m in total).
The study’s final report said that premium finance products can provide fair value and that existing rules were adequate to address any ‘bad actors’ charging unjustifiably high fees, a portion of insurers it acknowledged did exist.
Of the insurers the FCA challenged directly during the course of the study, it saw an average interest rate reduction from 37.6 per cent to 30.5 per cent. This translated to an average customer saving of £14, a figure that the regulator said gave it ‘confidence’ in its ability to drive change through existing supervisory tools.
In terms of industry-wide interventions, the report concluded that any action to cap or ban interest rates would be disproportionate, potentially raising premiums for all and forcing providers to withdraw premium finance options entirely.
Methodology:
- Which? researchers gathered 36 quotes from 30 companies between 26–31 August.
- The companies chosen were a mix of non-respondents from a June 2026 Which? Survey, the 10 most expensive quotes on MoneySupermarket and other providers chosen at random.
- A single customer profile was used for every quote: a 42-year-old driver, based in Sheffield, driving a Ford Puma, driving for 10 years with no claims or incidents in the last 5 years; 7 years NCD; drives 7,000 miles per annum.
- Researchers compared the providers on: their APRs, the price for an annual-paying customer, the monthly price, the total monthly cost and the extra total cost for paying monthly.
- Deposits, initial fees and varying payment instalments across the year were factored into the results.
Results summary (full results available)
Provider | Paying monthly - extra (%) | Paying monthly - extra (£) | Total cost upfront | Total cost monthly | APR |
Quote Detective | 16.20% | £244.76 | £1,511.27 | £1,756.03 | Not shown online |
UDrive Cover | 15.82% | £95 | £606.64 | £702.59 | 50.67% |
Sterling Insurance | 15.61% | £220.22 | £1,410.53 | £1,630.75 | 38.10% |
Rightsure - Covea | 14.24% | £353.60 | £2,483.41 | £2,837.01 | 34% |
Rightsure - Ageas | 14.24% | £229.08 | £1,608.96 | £1,838.04 | 34% |
Rightsure - Sabre | 14.24% | £367.75 | £2,583.23 | £2,950.98 | 34% |
City Insurance | 13.32% | £230.74 | £1,732.53 | £1,963.27 | 53% |
Acorn | 12.75% | £169 | £1,329.74 | £1,499.28 | 33% |
A-Choice | 12.40% | £125.10 | £1,009.18 | £1,134.28 | 28.8% |
Aura | 12.27% | £165.87 | £1,351.52 | £1,517.39 | 28.8% |
Right of replies:
All companies named that charge interest for monthly payments were approached for comment. Comments that were supplied are shown in full below.
Ageas
“Ageas is committed to offering products that provide fair value for customers and has robust processes in place to review this regularly. In this case, Ageas is responsible for the motor insurance product itself and is confident that it delivers fair value for customers.
“The finance arrangement referenced by Which? is a separate product provided by Rightsure. Rightsure is an independently regulated firm and is responsible for the products and services it offers its customers, including the terms of any finance agreement and the interest rates that apply.”
City Insurance
“We have been reviewing our premium finance arrangements and the APR charged to customers, particularly following the recent market review of premium finance.
“As part of that review, we have agreed new terms which will reduce the representative APR from the 53.03% rate as identified by Which? to approximately 36%, based on a flat-rate charge of 13.25%. The new terms will be introduced shortly once the revised contractual arrangements have been completed.
“During our independent market review, we noted that methodology in calculating APR varies between lenders, this can be misleading or confusing – it is clearer for customers to understand the interest rate being charged and the total cost being charged for credit as the important metric.
We continue to review our premium finance arrangements to ensure they provide fair value for our customers.”
RightSure
“We are unable to comment on the specific quotes obtained through your mystery shopping exercise. As an insurance broker, we do not control all of the factors that contribute to the total price payable by a customer.
“However, APR alone does not necessarily demonstrate the value provided to a customer. The Financial Conduct Authority takes customer value seriously and requires firms to carry out fair value assessments to understand whether the price paid by customers is reasonable in relation to the benefits provided. Our fair value assessment considers a number of factors, including the cost of providing the premium finance facility, the discounts we provide to customers who choose to pay by instalments and are funded from our premium finance earnings, and the cost of supporting customers who choose to pay for their insurance by instalments.
“Having taken these factors into account, our assessment indicates that the net profit generated from premium finance is approximately 0.4%, equivalent to around 40p for every £100 of financed premium. We therefore do not consider that assessing APR in isolation provides a complete or representative assessment of the value provided to customers.”
Sterling Insurance
“We are a specialist non-standard insurance provider, providing insurance cover to customers and risks that are often difficult to place within the standard insurance market, while seeking to maintain competitive and affordable premiums.
“The nature of the customer and risk profile we serve means that premium finance is associated with higher levels of credit risk, defaults and collection costs than would not typically be experienced in the standard market. These factors necessarily form part of the cost of providing the facility and are reflected in the current charges and APR.
“Importantly, we review our premium finance arrangements and Fair Value Assessment at least annually, including the costs incurred, customer outcomes and the overall value provided.
“We also recognise the importance of supporting customers who experience financial difficulties. Where a customer falls into arrears, we take a proactive approach to engage with them and explore appropriate options before any cancellation action is considered. This includes working with customers to bring payments up to date wherever possible, helping them maintain essential insurance cover and avoid the disruption and additional costs that can arise from policy cancellation.
“Where our experience and underlying costs allow us to reduce the APR or charges while continuing to provide the facility sustainably to this customer group, we will do so.”
About Which?
Which? is the UK’s consumer champion, empowering people to make confident choices and demand better. Through our research, investigations and product testing, we provide trusted insight and expert recommendations on the issues that matter most to consumers.
Fiercely independent, we put people over profit - shining a light on unfair practices, influencing policy and holding businesses to account to make life simpler, fairer and safer for everyone.
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