FCA welcomes fall in insurance premium finance costs
By Josh White
Date: Tuesday 03 Feb 2026
(Sharecast News) - People who pay for insurance monthly are saving an estimated £157m a year after a fall in the cost of premium finance, it was reported on Tuesday, following regulatory scrutiny by the Financial Conduct Authority.
The regulator said interest rates charged on premium finance had dropped by an average 4.1 percentage points since 2022, reducing costs by around £8 a year on a typical motor policy and £3 on a typical home policy.
It said the declines reflected a combination of lower base rates, closer regulatory attention and firms reassessing whether their products offer fair value.
Larger reductions were recorded at firms identified as posing the highest risk of failing fair value standards.
After direct engagement with the regulator, those providers cut annual percentage rates by an average of seven percentage points, saving customers about £14 a year on motor insurance and £4 on home insurance.
Nearly half of all motor and home insurance policies were paid monthly in 2023, equivalent to around 23 million policies, often because customers could not afford to pay annual premiums upfront.
The FCA said that underlined the importance of ensuring monthly payment options were priced fairly.
The watchdog confirmed it did not plan to impose a price cap or require insurers to offer interest-free premium finance, warning that such measures could limit access to cover for customers who rely on monthly payments.
Instead, it said it would continue to monitor the market and expected firms to consider whether further changes were needed to meet fair value requirements.
Graeme Reynolds, director of competition and interim director of insurance at the FCA, said the regulator had used its Consumer Duty powers to secure fairer outcomes "without needing to write new rules", adding that it would act where firms fall short of expectations.
Reporting by Josh White for Sharecast.com.
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