Car insurance experts are pushing for big reforms to be made in order to assist drivers who are faced with overwhelming costs, amid concerns that disadvantaged motorists are paying the price.
ABI Ensures Fair Car Insurance Payments for Monthly Payers Amid Cost Pressures
The Association of British Insurers (ABI) has pledged to take action by limiting the amount of money customers pay for automobile insurance each month and ensuring they are not charged extra.
To increase openness in the sector, the new Premium Finance Principles state that drivers should be properly informed of the amount they will pay each month.
It requests that insurers provide a clear comparison of the overall cost of paying annually against the overall cost of paying monthly before motorists accept the conditions.
The ABI also demands that insurers realise that many drivers want to pay monthly since they cannot afford to pay in one single sum.
Mervyn Skeet, ABI's director of general insurance policy, discussed the need for assistance to help drivers deal with rising prices.
He stated: “The principles announced today are one of a raft of actions we are taking to tackle the cost of motor insurance, which we know is putting pressure on households, especially those on lower incomes.
“We are doing all that we can within our reach as a trade body for insurers and hope that other organisations involved with premium finance follow our lead.”
“We’re also looking to investigate policy steps that could help low-income households specifically, as well as deliver on our broader Roadmap to tackling costs.”
The expert also urged the government to cut the Insurance Premium Tax (IPT), which is levied on all driver insurance policies.
He emphasised that this was nevertheless being charged at a time when the government was raking in “record tax revenues” from rising prices.
The current IPT rate is 12%, which adds approximately £67 to the average auto insurance policy.
Skeet has previously stated that the premium tax disproportionately affects those with less financial resources because they are more likely to spend more on insurance, involving home and auto coverage.
ABI's Advocacy for Equitable Insurance Practices and Consumer Empowerment
As part of its objectives for a fairer insurance market, the trade organisation intends to produce a report on the principles' impact by the summer of 2025.
Michael Foote, the founder of Quotegoat.com, commented on the new guidelines, saying: “The Association of British Insurers has finally taken meaningful steps to ease the financial strain on drivers who can’t afford to pay for their insurance in one lump sum.
“Insurers should recognise the challenges faced by those unable to pay upfront and opt for paying monthly — taking advantage of their situation is simply unacceptable and I hope providers found to be doing so will face consequences.
“Make it a habit to compare the price of your car insurance every year using comparison sites — never automatically take the first price you’re offered to automatically renew — it’s seldom the best price you’ll get.
“If you find a better offer elsewhere, don't be shy about negotiating with your current provider. It’s about time we hold our car insurance providers to account.”