The findings have renewed scrutiny of so-called “premium finance” arrangements, which allow customers to divide annual insurance costs into monthly payments. While some insurers have reduced rates in recent years, consumer advocates argue that many drivers continue to pay substantially more than those able to pay upfront.
For many households, paying monthly is the only practical way to maintain legally required motor insurance cover. According to Which?, this means that consumers with the least financial flexibility can end up facing some of the highest borrowing costs attached to essential services.
Which? Says Some Insurers Are Still Charging Rates above 25% APR
According to research conducted by Which? between February and March 2026, several motor insurers were charging annual percentage rates (APRs) above 25% on monthly payment plans, with some reaching as high as 29.9%.
The consumer organisation contacted 61 car insurance brands to request information about representative APRs applied to customers who choose to pay monthly. Of those approached, 48 companies either disclosed their rates or confirmed that they did not charge extra for paying in instalments.
Which? noted that conditions have improved since 2024, when some insurers were charging more than 35% APR. Even so, the organisation argued that progress has been slow and that high borrowing costs remain widespread across parts of the market.
Rocio Concha, director of policy and advocacy at Which?, said millions of motorists depend on monthly payments to afford car insurance. She argued that many are still being charged rates comparable to those associated with expensive credit cards.
Concha also criticised the Financial Conduct Authority’s response to the issue. According to Which?, the organisation believes the regulator’s intervention following a two-year market study has not gone far enough to reduce costs for consumers who rely on instalment plans.
The consumer group described the practice as a “poverty premium”, arguing that lower-income households are more likely to need monthly payment options because they cannot afford to pay annual premiums in a single transaction.
Insurance Industry Says Instalment Charges Reflect Genuine Costs
The Association of British Insurers (ABI) acknowledged that many households remain under financial pressure and that spreading insurance costs is essential for a significant number of motorists.
According to an ABI spokesperson, premium finance is widely used across the insurance market and charges can vary depending on both the insurer and the product being purchased.
The ABI said insurers incur genuine operational costs when offering monthly payment arrangements. These include maintaining insurance cover for customers even during periods when payments are delayed or missed. The trade body also pointed to industry principles stating that premium finance charges should be fair, transparent and reflective of the costs involved in providing the service.
Referring to the Financial Conduct Authority’s findings, the ABI said the regulator’s market study concluded that premium finance can provide fair value for consumers. The spokesperson added that the overall cost of premium finance has fallen since 2022.
The debate continues as consumer groups call for further action, while insurers maintain that instalment charges reflect the costs associated with offering flexible payment options to customers.
