Millions of UK drivers face higher insurance rates for monthly payments

Summarised from 2 outlets · Updated 14 Oct, 07:20 · Archive

An estimated 15 million UK drivers using monthly payment plans for car insurance face interest rates comparable to credit cards, Which? research shows.

An estimated 15 million UK drivers use premium finance to spread their car insurance payments into monthly instalments rather than paying annual lump sums. Which? conducted a mystery shopping investigation in August, collecting quotes from 30 motor insurance providers using a standardised profile of a 42-year-old motorist living in Sheffield with a decade of driving experience and no claims or incidents over the previous five years.

Across 36 quotes examined, the median annual percentage rate stood at 26.2 per cent, with some rates reaching above 50 per cent. Which? noted this compares to an average credit card APR of around 25.9 per cent based on Moneyfacts figures. Some providers offered 0 per cent APR, while others did not state their rate.

Rocio Concha, director of policy and advocacy at Which?, said the situation had 'already pushed too many consumers out of driving or into financial peril'. She called for a ban on two-tier pricing for motor insurance to 'create a fairer, more competitive system that doesn't punish the customers least able to pay'. Insurance firms told Which? that premium finance arrangements carried higher credit risk and were under review, with potential for APRs to be reduced.

How it is being reported

• Which? calls for ban on charging extra for pay monthly motor insuranceA ban on ‘two-tier pricing’ for motor insurance would create a fairer, more competitive system, the consumer group said.Evening Standard · 14 Oct, 06:57
• Millions of UK drivers affected by ‘two-tier car insurance pricing’ amid calls for banSome motor insurance customers could find themselves being charged rates higher than they might pay on a credit card if they cannot pay for an annual policy up front, according to Which?The Independent · 14 Oct, 00:01

In this story: Which? · UK · Sheffield · Rocio Concha · Moneyfacts

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