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Insurance Premium Finance Insights

At Consumer Intelligence, we believe everyone deserves clear, transparent, and fair insurance payment options. With more UK consumers now choosing to pay their insurance premiums in monthly instalments, understanding the real cost behind these payments has never been more crucial. Our insurance premium finance insights can help you stay informed about regulatory changes, consumer behavior, and cost implications to your business.

Table of contents
Why Premium Finance Matters The Rise of Instalment Payments Total Instalment Cost Report Press Coverage FCA's Market Study Regulatory Landscape: FCA's Market Study Understanding Total Instalment Cost (TIC) APR Awareness Month Recieve Exclusive Advice

Why Premium Finance Matters

As more consumers opt to spread the cost of their insurance over monthly instalments, the importance of understanding premium finance has never been greater. It’s not just a payment method, it’s a key component of fair value, regulatory compliance, and financial accessibility. For insurers and intermediaries alike, getting it right means building trust, improving customer outcomes, and staying aligned with Consumer Duty expectations.

£106 Million in Consumer Savings

Our latest findings reveal that UK consumers collectively saved over £106 million in the past year alone, driven by falling instalment costs amid heightened market competition and evolving regulatory scrutiny.

Transparent Cost Measurement

While APR (Annual Percentage Rate) is commonly used, it can often obscure the real cost to the consumer. At Consumer Intelligence, we're advocating for a shift towards Total Instalment Cost (TIC) a more accurate and transparent metric that shows exactly what consumers are paying.

Advancing Financial Inclusion

Premium finance plays a vital role in making insurance accessible to all. Instalment options provide a critical lifeline for vulnerable consumers who may lack access to mainstream credit, helping to ensure no one is priced out of protection.

"Focusing solely on APR can mislead consumers, particularly vulnerable customers who rely heavily on instalment payments. APR Awareness Month will clarify the real costs and encourage insurers to keep instalment charges transparent and fair. With Consumer Duty regulations coming this summer, the industry and consumers must understand these distinctions clearly."
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Ian Hughes, CEO, Consumer Intelligence

The Rise of Instalment Payments

In a challenging economic environment marked by inflationary pressures and tightening household budgets, more UK consumers are choosing to pay for their insurance in monthly instalments rather than up front. What was once a convenience is now a necessity for many—making premium finance a vital part of the insurance proposition.

Consumer Intelligence’s Insurance Behaviour Tracker reveals a striking shift: the proportion of motor insurance customers paying by instalments surged from 25% in late 2021 to 42% by late 2024. Home insurance followed a similar trajectory, with instalment use rising from 31% to 46% over the same period. This growing reliance on credit-based payment methods is not limited to any one demographic, underscoring its widespread relevance across the UK insurance market.

This behavioural change presents both challenges and opportunities for insurers. On one hand, it amplifies the need for responsible lending practices and transparent pricing structures. On the other, it creates new avenues for customer engagement, product differentiation, and enhanced loyalty—particularly if insurers can demonstrate that they are offering fair and accessible finance options.

In this landscape, premium finance is no longer a peripheral service—it’s a strategic lever that directly impacts customer retention, regulatory compliance, and overall brand reputation. Understanding how and why customers choose instalments is essential for shaping products that reflect real-world consumer needs and expectations.

Total Instalment Cost Report

Throughout April, Consumer Intelligence will release a series of insights into deposits, instalment options, credit availability, and overall affordability.
At the end of the month, this comprehensive report summarising key findings will be published.

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Press Coverage

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Insurance Post

FCA premium finance crackdown saves consumers £100m

Since the the Financial Conduct Authority’s head of insurance Matt Brewis labelled premium finance a “poor product”, car and home insurance customers have saved more than £100m in the past year after insurers reduced how much they charge policyholders for paying premiums monthly rather than annually.

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Insurance Post

Insurers cover APR cuts by increasing instalment costs

Consumer Intelligence has uncovered evidence that insurers are reducing their advertised annual percentage rate for premium finance without reducing the actual cost of paying for home and motor insurance in instalments.

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Actuarial Post

Insurance customers save GBP 100m as instalment costs

Consumer Intelligence launches APR Awareness Month to highlight true cost of insurance Instalments. Cost of living pressures and rising insurance premiums mean more customers are switching to paying by instalments.

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Regulatory Landscape: FCA's Market Study

The regulatory spotlight on premium finance is intensifying. In January 2025, the Financial Conduct Authority (FCA) launched a dedicated market study—MS24/2.1—to scrutinise the fairness and competitiveness of premium finance arrangements in the home and motor insurance markets. This marks a significant step in the regulator’s broader agenda to ensure that all financial products deliver fair value, in line with the Consumer Duty.

The study is investigating several critical areas: whether the costs of premium finance are proportionate, how those costs vary across firms and customer segments, and whether there are sufficient competitive pressures to keep prices fair. The FCA is also exploring whether consumers fully understand what they’re being charged, and whether firms are offering alternative payment options in a transparent and responsible manner.

The findings of this study will likely shape future regulation and enforcement in this space. For insurers, brokers, and finance providers, this is a call to action. Now is the time to examine internal practices, justify pricing structures, and ensure that instalment offerings are not only compliant—but also genuinely consumer-focused.

The FCA’s market study isn’t happening in a vacuum. It reflects growing political and public concern over the cost of living and financial inclusion. As such, the outcomes of MS24/2.1 could go beyond technical regulatory compliance and influence how the industry is perceived by both consumers and policymakers.

Staying ahead of the curve means aligning now with the principles the FCA is reinforcing: transparency, fairness, and a consistent focus on customer outcomes.

Understanding Total Instalment Cost (TIC)

As the insurance industry strives to meet higher standards of transparency and fairness, understanding how consumers are charged for paying in instalments is more critical than ever. While the Annual Percentage Rate (APR) has traditionally been used to communicate the cost of credit, it often fails to reflect the actual amount consumers pay over the course of their policy. This is why Consumer Intelligence is championing the Total Instalment Cost (TIC) as a clearer, more meaningful measure.

TIC represents the total additional amount a customer pays for choosing to spread their premiums across monthly payments, compared to paying annually in a single lump sum. Unlike APR, which can be distorted by policy duration or misinterpreted by consumers, TIC provides a tangible, pound-and-pence figure that reflects the real-world financial impact on the customer.

Our latest data shows that TIC is on a downward trend—a sign that competitive pressure and regulatory scrutiny are having a positive effect. Between 2023 and 2024, the average TIC for car insurance fell from 11.3% to 10.1%, while the TIC for home insurance dropped from 9.1% to 8.1%. In practical terms, this has translated into over £100 million in collective savings for UK insurance customers.

For insurers, the move towards TIC isn’t just a compliance or communication issue—it’s a strategic imperative. A clear understanding of TIC allows insurers to benchmark their offerings, assess whether they are delivering fair value, and clearly articulate costs to customers in line with Consumer Duty expectations. It also gives insurers a valuable tool to differentiate themselves by demonstrating transparency and fairness in an area that directly affects consumer trust.

As more consumers rely on premium finance, and regulators sharpen their focus, embracing TIC is a crucial step in aligning commercial practices with both ethical standards and customer needs.

 

Ensuring Compliance with Consumer Duty

The introduction of the FCA’s Consumer Duty has raised the bar for what constitutes fair value and transparency across financial services, including premium finance. Under the Duty, firms are expected to act in good faith, avoid foreseeable harm, and support customers in achieving their financial objectives. This means that insurers must take a close look at the true cost and structure of their instalment offerings.

Premium finance can no longer be treated as an ancillary consideration. It forms a core part of the customer journey and, by extension, a critical test of whether firms are delivering fair value. Our data shows substantial variation in instalment costs not only between insurers, but also across different products within the same provider. Such inconsistencies raise questions about fairness and risk attracting regulatory scrutiny.

To meet the FCA’s expectations, insurers should adopt a robust assessment framework that considers the Total Cost of Instalments (TCI), the customer profile, and the availability of alternative payment methods. Pricing strategies must be clearly justifiable and consistently applied, with outcomes monitored regularly to ensure they continue to meet the Duty’s requirements.

Ultimately, delivering fair value in premium finance isn’t just about compliance—it’s about doing right by the customer. And in a market where trust and transparency are increasingly competitive differentiators, it also makes good business sense.

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APR Awareness Month: Promoting Transparency

As premium finance becomes an increasingly common way for consumers to manage their insurance costs, it's more important than ever that the charges associated with it are clearly understood. Recognising the confusion that often surrounds the use of Annual Percentage Rate (APR) in insurance finance, Consumer Intelligence has launched "APR Awareness Month" a new industry initiative aimed at promoting clarity, fairness, and informed decision-making.

While APR is a standard metric in financial services, its application in short-term insurance credit can be highly misleading. APR calculations can vary depending on policy length and other technical factors, often resulting in inflated or misunderstood figures that fail to reflect the actual cost to the consumer. This confusion not only undermines trust but can also lead to poor customer outcomes—particularly in light of the FCA’s Consumer Duty.

APR Awareness Month seeks to address these issues head-on by advocating for the use of Total Instalment Cost (TIC) as a more transparent and relatable alternative. Through a mix of educational content, data insights, and industry commentary, the campaign aims to:

  • Educate consumers about what they’re really paying when they choose to spread the cost of their insurance

  • Support insurers and brokers in communicating instalment costs more clearly and responsibly

  • Encourage best practices across the industry in pricing and presenting premium finance options

  • Align market behaviour with regulatory expectations for fair value and clear communication

This initiative is not just about metrics it’s about rebuilding trust and confidence in a part of the insurance journey that often lacks visibility. By spotlighting the limitations of APR and championing a more customer-friendly alternative, APR Awareness Month positions Consumer Intelligence at the forefront of transparency and consumer advocacy in general insurance.

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Subscribe now to receive exclusive insights, detailed reports, and practical advice that will help you or your company navigate premium finance effectively. At the end of April, we'll release our comprehensive Premium Finance Benchmark Report, offering detailed analysis and showing exactly where insurers stand in the market.
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