'Ban extortionate premiums on pay-monthly car insurance,' urge campaigners – something MSE has long warned about
Campaigners are calling for a ban on extra charges for paying car insurance monthly, warning that motorists unable to pay an annual premium upfront can face interest rates of up to
By MoneySavingExpert
Campaigners are calling for a ban on extra charges for paying car insurance monthly, warning that motorists unable to pay an annual premium upfront can face interest rates of up to 53%.
The call follows research by consumer champion Which?, which examined quotes from 30 car insurance providers and brokers. It found that monthly payments could add as much as £367.75 to the total cost of a policy.
Paying monthly is generally arranged through premium finance, where the annual insurance cost is effectively borrowed and repaid in instalments. Interest is then added to the amount paid by the customer.
Which? said 22 of the quotes reviewed cost between 10% and 16% more when paid monthly than upfront. Among 48 insurers that disclosed their annual percentage rates, the average was 23%, although none charged more than 30% in that part of the research.
One example involved a Rightsure policy priced at £2,583.23 when paid annually. The total rose to £2,950.98 when spread across monthly payments.
Which? said around 15 million people in the UK use monthly payments for car insurance. It argued that the arrangement is often a necessity for households unable to find the full annual premium at once, rather than a matter of choice.
Rocio Concha, Which?’s director of policy and advocacy, said some consumers had been pushed out of driving or into financial difficulty by pricing practices that charge less wealthy customers more.
The organisation is calling on the Government to ban insurers from charging extra for monthly payments. It also wants insurers to be required to offer a monthly payment option.
James Daley, managing director of Fairer Finance, said: “It can't be right that the poorest people in our society are forced to pay the most for their car insurance.”
The Financial Conduct Authority completed a market study in March 2026 and ruled out introducing a price cap or banning interest on pay-monthly policies. Which? is now urging the Government to act on what it describes as two-tier pricing in motor insurance.