Insurers charging rates similar to credit cards for monthly cover – Which?

insurers charging rates similar to credit cards for monthly cover – which?

Insurers charging extortionate monthly rates

Some motorists could be charged nearly 40% APR (annual percentage rate) when paying for their insurance monthly, according to Which?.

The consumer group also said some home insurers are charging nearly 35% APR on monthly payments.

It added the rates being charged by some insurers to pay for monthly cover resemble the interest applicable for credit card borrowing.

Which? asked 39 car insurers and 34 home insurers what APRs were being applied to monthly payments.

We offer a range of APRs from 5% to enable us to provide credit to as many customers wishing to pay monthly as possible, including those with low or poor credit scores

1st Central

Many insurers did not disclose their APR, but among those that did, Which? found 1st Central charges between 5% and 39.11%. It gives customers a personal interest rate after a credit risk assessment, Which? said.

The average rate across 27 providers that charge interest and disclosed their rate was 23.37%.

Only two car insurers asked – NFU Mutual and Hiscox – said they do not charge interest on monthly repayments.

1st Central told Which?: “We understand it is important to customers that we keep the price of insurance as low as possible, and benchmarking tells us that we are competitive for both annual premiums and for those that wish to pay monthly through a credit arrangement.

“We offer a range of APRs from 5% to enable us to provide credit to as many customers wishing to pay monthly as possible, including those with low or poor credit scores. Over the past quarter, less than 2% of customers paid our highest APR.”

1st Central also said consumers may focus on the total monthly cost – where it is often highly competitive.

For home insurance, the highest rate in the Which? study was from Co-op Insurance. Which? found customers pay between 31.31% to 34.75% APR on monthly payments.

The average across the providers that charge a rate and disclosed it was 23%.

We are looking to reduce (rates); we will update our customers on this as soon as we can

Co-op Insurance

Co-op Insurance works with partners to provide insurance cover and it said it is looking to reduce rates where possible. It added it chose to share its rates with Which? as it is committed to transparency.

A spokesperson for Co-op Insurance said: “Co-op Insurance welcomes this survey analysis from Which?.

“We recognise the importance of premium finance as a product in the insurance industry, giving customers the option to spread the cost of their insurance over the course of a year.”

Co-op Insurance said an insurance partner performs regular benchmarking, adding: “This benchmarking has led us to review these rates and we are looking to reduce them. We will update our customers on this as soon as we can.

“At Co-op, we are committed to transparency for our customers and have taken such an approach when responding to Which? throughout this process.”

Fifteen home insurance providers surveyed said they do not charge interest: Bank of Scotland, Halifax, Hiscox, HSBC, Lloyds Bank, MBNA, M&S Bank, Nationwide Building Society, NFU Mutual, SAGIC, Sainsbury’s Bank, Santander, TSB, Urban Jungle and Yorkshire Building Society.

Which? said that in January this year, the average credit card rate was 34.8%, with the majority of cards charging up to 25%.

But Which? argued the risk to insurers is lower than for credit card providers, because the credit being offered is directly linked to the sale of the insurance policy and non-payment by customers can lead to the cancellation of the policy.

Since January 2022, motor and home insurers have been required to provide fair value on their products and those requirements have been further strengthened by the introduction of the Financial Conduct Authority’s Consumer Duty last year.

Which? said the regulator should produce an action plan to make sure that firms are providing fair value in the interest rates they are charging customers. It called for a league table of providers to be produced by the regulator.

Rocio Concha, Which? director of policy and advocacy, said the FCA should “step up and to get tough with firms”.

A spokesperson for the Association of British Insurers (ABI) said: “Our members understand how important access to appropriate insurance is for their customers and are very aware of the financial pressures households are currently under.

“Paying premiums by monthly instalments is an option they offer to help customers manage their budgets.

“The cost of premium finance is one of a number of topics we continue to discuss with our members and the Financial Conduct Authority.”

An FCA spokesperson said: “Premium finance helps people to spread the cost of insurance. We have made it clear to industry they need to ensure people are getting fair value from it.”

David Mendes da Costa, principal policy manager at Citizens Advice, told MPs on the Treasury Committee on Wednesday that the charity is seeing a “clear rise” in people coming to it for help who are unable to afford their insurance.

He said: “To be clear, insurance really is an essential, especially when it comes to car insurance at least. People need it to drive and people need to be able to drive in order to look for work, in order to get to work, in order to make hospital appointments or run their kids to school.”

He said people are having to make “impossible choices”.

Mr Mendes da Costa later told the committee: “We know that people on lower incomes tend to be charged more for their insurance, setting aside this question of annual versus monthly (premiums).

“What we see in our own data is that people of colour are charged on average £250 more for their car insurance than white people.

“What we think is none of this is direct discrimination, no-one’s collecting this data in order to do so, we think it’s indirect discrimination on the way that postcodes are treated and in the way that risk is attached to it. But there’s no clarity on what’s driving that, what risk factors are attached to postcodes, or what cost factors are attached to them.”

Register now for one of the Evening Standard’s newsletters. From a daily news briefing to Homes & Property insights, plus lifestyle, going out, offers and more. For the best stories in your inbox, click here.


12 minutes ago

A brand-new F-35 crashed into a New Mexico hillside while flying from a Lockheed Martin facility to a US airbase

14 minutes ago

Owner of UK's Royal Mail says it has accepted a takeover offer from a Czech billionaire

17 minutes ago

Texas police arrest fugitive illegally in US, wanted for murder by Interpol

17 minutes ago

Transfer News LIVE: Latest club signings, deals and rumours as Chelsea look to appoint Leicester boss Enzo Maresca and Premier League top dogs look to raid Leeds after failed promotion bid

17 minutes ago

Video: Queen Letizia of Spain steps out solo at awards ceremony in Madrid as bombshell book claims King Felipe was 'crushed and destroyed' by her 'infidelities'

17 minutes ago

Nikita Kirby, 31, is charged with murder after her ex-boyfriend was stabbed to death at a home in Sydney's eastern suburbs

20 minutes ago

Lopetegui wants West Ham to sign 45 million player after Fabricio Bruno

20 minutes ago

HOLLY WAINWRIGHT: We got it all wrong about 'Marathon Mum'.

20 minutes ago

‘This Murad product is like a facial in a tube – how to try it for less than £2’

20 minutes ago

Veterans from top-secret Area 52 sickened by toxic substances - but get no benefits as ‘it doesn’t exist’

21 minutes ago

Europe stocks lower after worst session for a month; Royal Mail owner IDS up 3% after sale agreement

22 minutes ago

Charles Barkley Identifies Timberwolves' Biggest Mistake In Series Against Dallas Mavericks

22 minutes ago

Biden campaign should focus on Trump as threat to ‘middle-class life’: Begala

22 minutes ago

David Stearns not thinking about trade deadline amid Mets struggles: ‘We have a group of players that is determined to play better’

22 minutes ago

10 Of The Most Iconic Motorcycles Of All Time

22 minutes ago

‘More news, less views’: David Littleproud calls out ABC host’s ‘strong’ views against Coalition

22 minutes ago

Pogacar is also financially the Big Man of the Giro, with the second in line far behind and Arensman somewhat surprisingly in top ten

22 minutes ago

‘Items of interest’ found in Samantha Murphy search; News Corp restructure revealed; and Pompeii’s gladiator drawings

22 minutes ago

Outside Manhattan court, Robert De Niro calls Trump a "coward" who has others do his "dirty work"

22 minutes ago

Eastern Conference contender reportedly preparing to offer Jimmy Butler max contract if Miami Heat star is traded

22 minutes ago

Man casually rides past lion on motorbike in viral video, leaving peeps in awe

22 minutes ago

Kate Middleton's go-to brand Aspinal of London launches huge up to 50% off sale on handbags, purses and more - including the ever-loved mini Mayfair

22 minutes ago

Stylish and affordable homeware picks from £35 at Inside Story - the latest home interior brand YOU need to know about (plus, save 20% off your order)

25 minutes ago

Molly Ringwald says she was ‘taken advantage of’ by Hollywood predators

27 minutes ago

Video: Instant karma! Crook tries to rob female store worker... who happens to be a KICKBOXER and pummels him senseless

27 minutes ago

Video: Family of watch dealer Oliver White say he took his own life over 'distress' of being robbed - as firm says thieves posed as clients in three-day '£2.8million' sting but strict security rules were not followed and he should not have been alone

27 minutes ago

Video: Labour meltdown as Diane Abbott says she IS being blocked from standing at election: Keir Starmer branded 'disgraceful' and accused of 'West Wing politics' as row over veteran left-winger mounts

28 minutes ago

OPINION - The Standard View: Keir Starmer's vow to end the 'London bashing' is a welcome message

28 minutes ago

Kate Szepanowski arrives to court as her boyfriend faces $124million cocaine charge

28 minutes ago

ITV GMB viewers slam 'unwatchable' Charlotte Hawkins as she replaces Susanna Reid

28 minutes ago

'Lib Dems defied the odds'

28 minutes ago

Mother of Princess Beatrice's stepson Wolfie poses in stunning outfits at 'exciting' Monaco Grand Prix after saying co-parenting with the Royal is 'so easy' and believes 'the more the merrier' when bringing up children

28 minutes ago

Security vetting of MPs staff ‘concerning’

29 minutes ago

A Case for the Defence: Five Potential Ottawa Senator Free Agent Targets

29 minutes ago

Stars brimming with confidence heading into Game 4 vs. Oilers

29 minutes ago

World Championship could move from Alexandra Palace after ‘Luke Littler effect’

29 minutes ago

Canon demonstrates the power to drive positive change at drupa 2024 through charity and start-up support initiatives

30 minutes ago

Kanye West, Bianca Censori turn heads in latest all-white outfits

30 minutes ago

2025 Toyota LandCruiser Prado 250 v 2024 Toyota LandCruiser Prado 150: Spec battle

30 minutes ago

Tom Sandoval's cheating scandal 'is a badge of shame'