Are the costs of your monthly payments reasonable?

Car Insurance Payment Options

If you choose to pay for your car insurance in monthly instalments, you will end up spending nearly £100 more each year for this convenience. This method of payment is more common among individuals from lower-income households, who are also less likely to compare prices each year compared to those who pay the full amount upfront.

Premium Finance and Insurance

Premium finance enables individuals who cannot afford to pay their insurance in one lump sum to still obtain coverage through regular monthly payments. This practice has become a significant part of the insurance industry, with the FCA’s market study in 2019 revealing that premium finance contributes to 21% of non-core revenues in the motor insurance sector.

Regulatory Focus on Fair Value

The FCA is turning its attention towards the relationship between price and value in the cost of credit. New rules introduced in October now require firms to provide data on the interest rates charged, customer payment methods, and total charges for premium finance. Value assessments must be completed by the end of the month to ensure compliance with fair value regulations.

Expectations for Firms

All insurance firms must be prepared to answer fundamental questions about their pricing strategies and value propositions. With the upcoming Consumer Duty Principle, firms will need to take a more active role in delivering good outcomes for customers. Ensuring fair value in premium financing arrangements and product pricing will be key to regulatory compliance.

Consumer Perspectives and Market Trends

Drivers opting for monthly payments often belong to lower-income groups and are less likely to shop around for better deals. Understanding the cost of credit and value proposition is crucial for firms to protect potentially vulnerable customers. Market changes and innovations in premium finance may lead to increased competition and new players entering the sector.

FCA Compliance and Future Outlook

Fair Value Assessments are due by September 30, 2022, and non-compliance could result in regulatory action. The FCA is closely monitoring firms’ adherence to fair value principles and may introduce further regulations in the future. Stay informed about regulatory changes and consumer trends through our Webinar Hub for valuable insights and updates.