FCA finds falling premium finance rates for insurance customers

The FCA has found that interest rates for premium finance have fallen by an average 4.1 percentage points in the past 3 years, which has resulted in savings for customers on mainly motor but also home insurance. Firms which the FCA had singled out as being at highest risk of not providing fair value have reduced rates even more.

The FCA noted that many people have no choice but to pay premiums monthly, meaning they have to take finance (around half of all motor and home insurance was paid monthly in 2023), and is pleased that it has been able to use the Consumer Duty as a reason to get fairer value for consumers in those instances where competition was not already driving it.

The FCA is not planning any further action at this point, but generally expects firms to consider whether they need to make any further changes to meet fair value requirements.