Consumers still being ripped off after regulator gave green light to car insurance ‘poverty premium’ charges
The consumer champion's premium finance survey found that some insurance providers and brokers are still charging APRs of close to 30 per cent on monthly motor insurance payments, raising concerns that consumers who cannot afford to pay upfront are being unfairly penalised. The FCA investigated the issue for two years but concluded its market study in February, with little more than a slap on the wrists for some of the worst offenders.
Which? found that between February and March 2026, several firms continued to charge particularly high rates for motor insurance premium finance. Providers including Dial Direct, The Co-operative Insurance and Policy Expert were among those charging APRs above 25 per cent, with a number of firms charging 29.9 per cent.
Paying monthly is often the only realistic option for households facing financial pressure. However, consumers who spread the cost of essential insurance products can end up paying hundreds of pounds more over the course of a year than those who are able to pay annually.
The findings come despite years of regulatory scrutiny of the premium finance market. Two years ago, some firms were charging rates above 35 per cent APR. While some providers have lowered their rates since then, Which? believes progress has been too slow and that many consumers continue to face unreasonably high borrowing costs.
The FCA’s recent market study confirmed that premium finance products are less risky than many other forms of lending because insurers can cancel cover if payments are missed. Despite this, some consumers are still being charged interest rates similar to those offered on credit cards, where the median purchase APR stood at 25 per cent at the end of April.
The consumer champion warns that these practices contribute to a "poverty premium", whereby lower-income households, who are more likely to rely on monthly payment options because they cannot afford high upfront costs, end up paying substantially more.
The FCA's intervention in the premium finance market appears to have focused primarily on firms charging above 30 per cent APR - creating a risk that any rates below this level are effectively legitimised.
Which? is calling on the regulator to require further pricing changes across the market to ensure all consumers receive fair value.
The findings form part of wider concerns from Which? about fair value and consumer outcomes in the insurance sector. Following its super-complaint on insurance, Which? will give evidence to the House of Lords Financial Services Regulation Committee on 17 June, highlighting further concerns about product terms, sales processes and claims handling.
Rocio Concha, Director of Policy and Advocacy at Which?, said:
"Millions of motorists rely on monthly payments to afford essential car insurance cover, yet many are still being charged interest rates comparable to an expensive credit card.
"While some of the worst offenders have reduced their rates following regulatory scrutiny, the FCA’s weak approach appears to have been taken as a green light by the industry to keep charging extortionate rates. This means those who can least afford it are still paying significantly more simply because they cannot pay upfront.
“The FCA must take further action to drive down rates across the market and ensure all consumers receive fair value.”
ENDS
Notes to Editors
Between February and March, Which? attempted to contact 61 car insurance brands, asking about the representative APRs charged to their customers who pay monthly. Some 48 responded and shared their rates (or said they didn’t charge extra for paying in instalments). The table below shows the providers charging 25% APR or more.
To read the FCA’s market study, click here.
About Which?
Which? is the UK's consumer champion, empowering people to make confident choices and demand better. Through our research, investigations and product testing, we provide trusted insight and expert recommendations on the issues that matter most to consumers.
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