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Monthly car and home insurance prices are still packing a premium
Which? research shows some providers charge interest rates of around 30% if customers pay in instalments
After nearly a year of monitoring insurers' charges for pay-monthly customers, we've found that some providers have cut their rates – but that hefty charges persist.
Millions of insurance customers use 'premium finance' to pay for their cover in monthly instalments. From a new survey of 71 insurance firms, we can reveal which providers charge nothing for the privilege of splitting the bill – and those which attach annual percentage rates (APRs) resembling what you'd pay with an expensive credit card.
As well as showing the firms with the steepest and cheapest charges, we examine how rates have been changing in the last year, and how the industry could be set to change going forward.
Which insurance providers charge for paying monthly?
Following similar research in March and August last year, we contacted 52 car insurance firms and 46 home insurance providers to find out what they charge customers who pay monthly.
As the tables below show, all but three of the car insurers who responded charge extra for paying in instalments. By contrast, half of home insurance firms charge the same price whether you pay all at once or in monthly instalments.
Among firms that do charge, rates range widely – from 12% to over 30%.
Car insurance providers
The Insurance Factory | 30.72% (renewing customers) - 34.08% (new customers) |
iGO4 | 30% |
Dial Direct | 29.90% |
Nutshell | 29.90% |
Zenith insurance | 29.90% |
| 29.89% | |
Budget | 28.90% |
Based on a survey of 71 insurance brands carried out in February 2025, in which we asked providers to tell us which APRs are currently applied for car and home insurance customers paying monthly. Some providers that were contacted either didn't respond or did answer but didn't disclose their APRs.
Some providers apply a range of APRs depending on customer group/risk. In these cases - where an average or overall representative rate wasn't provided - the rate used for the purposes of our analysis and table rankings was either that for new customers or the mid-point of the range.
'C' means 'circa'
How premium finance works
According to estimates by the Financial Conduct Authority, over 20 million customers use premium finance to buy insurance. It's available at the click of a button once you've received your insurance quote, but behind the scenes it's technically a kind of loan.
You borrow the annual premium from your insurer or a finance company working alongside it – and then repay the amount gradually across the year.
It consequently might not seem too out of place that the average APRs charged (22.84% for car insurance and 21.59% for home insurance) aren't too dissimilar to credit card rates on purchases. The average credit card rate is 35.42%, but the majority charge 24.90% APR or under.
Why we think rates are too high
However, there's a big difference when it comes to the amount of risk the lender takes on. If you default on your credit card payments, the lender may never get its money back. But if you stop paying for your insurance, the provider will cancel the policy, meaning it doesn't really 'lose' the full value of the unpaid part of your premium.
We think this makes the rates currently charged by many insurers difficult to justify – especially with car insurance, where a third of rates are above 25%.
- Find out more: Read our guide to finding cheap car insurance.
Highest interest rates are above 30%
As the tables show, The Insurance Factory levied the highest charges on monthly car insurance payers, while One Insurance Solution had the highest APRs for home insurance customers.
Both charge 30.72% for renewing customers and 34.08% for new customers. Meanwhile, iGO4, Dial Direct, Nutshell, Zenith Insurance and Co-op Insurance all had rates of around 30%.
All of these highest-charging brands were connected to Markerstudy Distribution – a broker – or its parent organisation, Markerstudy Group.
How rates have changed
We did see some reduction in rates generally, with 1st Central, Admiral Group, AXA and Hastings Direct lowering their rates since our survey last summer. Similarly, when we spoke to Markerstudy, a spokesperson said that it has reduced rates for several of its brands, and plans other reductions 'in the coming months.'
Markerstudy didn't disclose its rates in our previous survey, meaning we can't compare exactly how they've changed generally. However, when we ran our own illustrative quotes (for one London-based Vauxhall Corsa driver) on some of its brands' websites last summer, we were offered prices with APRs as high as 45%. The lower figures offered since suggest that it has been making cuts.
Meanwhile, the home insurer Ecclesiastical, which last August charged between 8.26%-13.44%, has since stopped charging altogether for monthly customers. A spokesperson told us that it was 'committed to putting customers first, and by removing the interest charges, we're helping to make our household premiums more affordable for those customers who need to spread the cost.'
Pressure to improve
While we've been calling on the industry to give a fairer deal to monthly payers for over a year, other looming concerns are likely to have given some of the less competitive firms added incentive to improve or remove their rates.
The FCA stated last October that it is concerned that premium finance may not be providing fair value, and is now conducting a market study into the pricing practice. An initial report is expected by the end of June this year.
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Sign up now'It's like kicking customers when they are down'
Rocio Concha, Which? director of policy and advocacy, said: 'People often don't tend to 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.'
Support our campaign to end the insurance ripoff
Trust in insurers is low, and interest rates penalising those who can least afford it isn't doing much for the industry's case. We think this is just one way in which the insurance sector is in need of repair.
- Find out more: learn about our campaign to end the insurance ripoff and sign our petition.
