Consumers who pay for insurance on a monthly basis are saving approximately £157 million per year following reductions in premium finance costs, according to the Financial Conduct Authority (FCA).
The regulator said more than half of the firms it reviewed have lowered the cost of premium finance since it began scrutinizing the market. Interest rates have fallen by an average of 4.1 percentage points since 2022, translating to savings of £8 on a typical motor policy and £3 on a typical home policy per year.
Firms identified as at highest risk of not providing fair value made more significant changes following direct engagement with the regulator, reducing APRs by an average of seven percentage points.
The findings follow the FCA's decision in July 2025 to rely on individual firm monitoring rather than market-wide measures such as APR caps, commission bans or mandatory 0% finance.
The regulator said at the time that such interventions could reduce availability of premium finance and restrict access to cover for customers who cannot afford annual payments.
Graeme Reynolds (pictured above), director of competition and interim director of insurance at the FCA, said monthly payments are a necessity rather than a choice for many policyholders. "Where we found issues, we used our Consumer Duty to get people fairer value, without needing to write new rules," Reynolds said.
Ian Hughes, CEO at Consumer Intelligence, said the FCA's findings confirmed what researchers had been observing. "The APR alone doesn't tell the full story of what consumers pay for insurance instalments," Hughes said.
However, parts of the market remain cautious about regulatory direction. According to the British Insurance Brokers' Association (BIBA), there is still significant confusion around fair value requirements, with insurers sometimes applying what BIBA described as a "platinum-plated approach" when collecting data from intermediaries.
In 2023, nearly half of motor and home insurance policies – approximately 23 million – were paid monthly. The FCA said it expects all firms to assess whether further changes are needed to meet fair value requirements and has shared examples of good and poor practice observed across the market.
Reynolds added that while the regulator is not planning further market-wide changes, it will continue to monitor fair value and act if firms fall short of expectations.
