The FCA has unveiled new measures in the insurance industry to address rising costs, while the Government launches a motor insurance taskforce aimed at stabilizing premiums.

As part of its review of the insurance market, the FCA has initiated a competition study to determine if customers who finance their motor and home insurance through borrowing are being offered fair and competitive deals.

Premium finance allows policyholders to pay for insurance in monthly instalments, but with interest rates typically ranging from 20% to 30% annually, the FCA is concerned this option may not provide good value. It is estimated that over 20 million people finance their insurance this way, and the FCA’s research shows that 79% of adults experiencing financial difficulties have used premium finance.

The FCA’s study will assess the value of these products, whether customers are adequately informed about their financing options, and whether commissions and other factors limit competition in the motor and home insurance finance market.

Graeme Reynolds, Director of Competition at the FCA, said:
“Premium finance helps people manage insurance costs by spreading payments over time. We want to ensure competition works to the benefit of consumers, making it easier for them to find the best deals.”

FCA’s Role in the Government Motor Insurance Taskforce:
The newly launched Government motor insurance taskforce, which includes the FCA, aims to identify solutions for stabilizing or lowering motor insurance premiums without compromising coverage.

The FCA will closely examine the factors driving rising motor insurance costs, including claims costs and handling processes. It will also investigate how increased premiums are affecting different demographics, such as young and older drivers, as well as those from ethnic minority groups or with lower incomes.