Drivers who opt for monthly car insurance payments are being charged an average of £300 more than those who pay annually, according to a recent study conducted by consumer group Which?
In November 2019, monthly payers were charged an average of £673 for a year’s coverage, while annual payers paid just £456, resulting in a substantial difference of £217.
However, by November 2022, this gap had widened to £302, representing a staggering increase of 39%. Monthly payers were now facing an average cost of £757.60, in contrast to the £455.49 paid by those who settled their premiums annually.
Additional data provided by comparison site GoCompare revealed that, as of November 2022, nearly half (46%) of car insurance customers opted for monthly instalments.
While not all monthly payers faced higher costs, Which? warned that the steeper price increases could disproportionately affect drivers who can least afford them.
Younger customers, who are often categorised as higher-risk drivers by insurers, tend to favour monthly payment plans, according to GoCompare.
Low-income households are also more likely to opt for monthly payments and are subsequently subjected to higher insurance premiums, as noted by the Financial Conduct Authority (FCA).
“At a time when household budgets are under huge strain, it’s concerning that customers who pay monthly for their insurance could be paying far more than those who pay their annual premium upfront,” said Which? money editor Jenny Ross.
A spokesperson for the Association of British Insurers (ABI) acknowledged the financial strain experienced by households due to the rising cost-of-living and stressed that insurers are committed to providing competitively priced insurance to as many people as possible.
“The option to pay your premium monthly is one way of spreading your cost across the year,” said the ABI spokesperson via PA News Agency. “You receive a full year’s worth of insurance at once but, similar to taking out a loan, the monthly repayments may come with added interest, which can make it a more expensive option.
“We would always recommend shopping around to find the best policy that meets your needs, not just based on price. If you’re struggling to pay your premium, speak to your insurer who should be able to help.”
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