Consumer Intelligence today welcomed the Financial Conduct Authority’s (FCA) recently published “Premium Finance Market Study Update Paper” (July 2025). Consumer Intelligence is delighted that the FCA’s findings align so closely with its research and analysis on premium finance, which was initially published in April. The report highlights the increasing regulatory emphasis on fair value in premium finance and validates Consumer Intelligence’s longstanding advocacy for transparent cost metrics.
The FCA's paper highlights that premium finance is a significant payment method, used for around 48% of motor and home policies in 2023. For many consumers, particularly those in vulnerable groups, it is a necessity rather than a choice, as they cannot afford to pay the annual fee. Consumer Intelligence’s data corroborates this, showing a substantial increase of over 10 percentage points in instalment usage in both Motor and Home insurance between 2022 and 2024, with over two-fifths of UK consumers now opting to pay monthly.
A key takeaway from the FCA’s report, and a central tenet of Consumer Intelligence’s research, is the disparity between Annual Percentage Rate (APR) and the actual cost of premium finance. The FCA notes that typically, APRs for premium finance range between 20-30%, but almost 20% of consumers pay over 30%. Consumer Intelligence has consistently demonstrated that APR alone can be misleading; for example, our data showed how Swinton’s APR fell from 33.80% to 26.90% due to changes in repayment structure, yet the Total Instalments Cost (TIC) remained stable at 11.37%. The FCA's observation that consumers focus on the "total cost of bundled insurance and premium finance" further reinforces the importance of TIC as the definitive measure of actual consumer outlay.
Market dynamics also vary significantly between Motor and Home insurance. The FCA found that more than a third of home insurance customers pay the same amount for monthly payments as they do for annual fees, compared with less than 3% of motor insurance customers. Consumer Intelligence's data confirms this, showing that the average TIC for Home insurance is lower at 8.1%, compared to 10.1% for Motor Insurance. This is partly due to the prevalence of 0% finance options in Home insurance, offered by 11 brands, many of which have banking connections. Direct brands generally offer lower TICs than intermediaries (Motor: 8.6% vs. 11.3%; Home: 6.1% vs. 9.3%), highlighting distinct business models and revenue strategies. Premium finance is a significant revenue stream, accounting for approximately 20% of non-core revenue for both intermediaries and insurers. Admiral, for instance, reported £255 million in income from instalments and administration fees in 2024, a 55% year-on-year increase.
The FCA also addressed concerns regarding "double dipping," where the decision to pay monthly may affect the underlying insurance premium. Consumer Intelligence's data indicates that some insurers use monthly payment information as a rating factor, potentially increasing costs for instalment users, which aligns with the FCA's concern.
Crucially, the FCA has indicated it is not currently proposing blanket APR caps, mandating 0% APR, or banning commission. Instead, the focus will be on challenging "APR outliers" and ensuring "fair value". This places a significant onus on firms to understand and justify their pricing strategies.
"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," said Ian Hughes, CEO at Consumer Intelligence. "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."
In a market where rates and practices are constantly evolving, relying solely on APR or outdated data leaves insurers vulnerable. Consumer Intelligence's "Instalments View" and "Insurance Behaviour Tracker" provide the detailed, up-to-date intelligence necessary for insurers to ensure Consumer Duty compliance, identify competitive advantages, and adapt quickly. Consumer Intelligence is making its updated first quartile data for Total Instalments Cost (TIC) for this quarter available.