Some car and home insurers are still charging annual percentage rates (APRs) equivalent to pricey credit card lenders for customers to pay for cover monthly, despite repeated warnings that this could be excessive, Which? research has found.
The consumer champion asked 52 car insurers and 46 home insurers what rates of interest they charged customers to pay for cover monthly. The Financial Conduct Authority’s Financial Lives Survey estimates that over 20 million people pay for insurance using premium finance. Customers often pay this way because they struggle to afford the full cost of cover for the year upfront.
The vast majority of car insurers charge interest to pay monthly – with only a small handful saying they did not. Among home insurers, half of providers responding to our survey said they do not charge interest.
The average APR across car insurers was 22.84 per cent. The average APR across home insurers was 21.59 per cent – but a number of providers charge significantly more.
The highest APRs were charged by One Insurance Solution and The Insurance Factory. Both charged between 30.72% and 34.08% – with One Insurance Solution for home insurance, and The Insurance Factory for car insurance. These rates are comparable to credit card lenders. As of late February, the average purchase APR for a credit card was 35.42%. However, most (55.30% of) cards have rates of under 25 per cent.
Which? researchers also conducted a mystery shop of car insurance providers that either did not respond or disclose their APRs in our survey, obtaining quotes as a 40-year-old Vauxhall Corsa driver based in South London. All but one (John Lewis) of the brands that quoted our mystery shopper had APRs higher than 25% APR. The highest came from GoSkippy, which charged 28% APR.
This is the third time Which? has asked firms to provide this data since March last year. Among the 24 car insurance firms which disclosed rates in all three surveys, the average APR has reduced slightly – down from 23.14% in March 2024 to 21.03% in February 2025. However, there remain concerningly high rates – in some cases around or above 30%.
Which? believes the risk to insurers is much smaller than for credit card lenders because non-payment can lead to a termination of the policy, making such high rates of interest difficult to justify. The Financial Conduct Authority (FCA) said when it launched a market study into premium finance last year it was concerned with ‘charges potentially being too high relative to the credit risk and cost of providing the service’.
Most brands with the highest APRs on repayments are connected to Markerstudy Distribution, a broker – and its parent organisation – Markerstudy Group. A Markerstudy Distribution spokesperson told Which? that it had reduced rates of several of its brands – with further reductions planned in the coming months.
Thirty home insurers responded to surveys conducted in August 2024 and February 2025. Of these, three insurers (1st Central, Admiral, Hastings Direct) decreased their rates during this period, and Ecclesiastical stopped charging altogether at the beginning of March (having previously charged between 8.26% and 13.44%). Ecclesiastical’s change represented the biggest decrease.
Ecclesiastical’s decision means there are now 19 providers that do not charge interest and raises questions about why other firms cannot follow suit.
Ecclesiastical told Which? that by removing the interest charges, it was ‘helping to make our household premiums more affordable for those customers who need to spread the cost.’
Which? remains concerned that too many insurers are charging unjustifiably high rates of interest to customers who can afford them the least. The FCA, which has previously called premium finance a ‘tax on being poor’, is currently conducting a market study into this pricing practice, with its findings expected in summer.
 Which? believes the regulator needs to get to the bottom of what it costs firms to charge customers interest to pay monthly and whether this represents fair value, as per the requirements of firms under the Consumer Duty.
The consumer champion believes that the FCA should not hesitate to take action against firms found to be falling short of their regulatory requirements.
Rocio Concha, Which? Director of Policy and Advocacy, said:Â
“People often don’t pay for car and home insurance in monthly instalments out of choice, but financial necessity. For millions to be hit with excessive extra charges due to their circumstances seems like kicking customers when they are down – and this is exactly the kind of unfairness the regulator should have in its sights.
 “Encouragingly, the FCA is now looking into this issue. As part of its market study, the regulator must get to the bottom of what fair rates of interest are by gathering information from firms on profit margins and commission levels – and ultimately be prepared to take tough action against firms continuing to charge excessively high rates of interest on monthly repayments.”
