UK car and home insurance customers collectively saved more than £100 million over the past year, driven by a sharp reduction in the additional charges applied to monthly premium payments, according to new data from Consumer Intelligence.
The consultancy’s analysis shows the average total instalment cost (TIC), or the extra amount paid for choosing monthly payments over a lump sum, dropped to 10.1% in the past 12 months, down from 11.3%.
The decline follows increased competition among insurers and growing regulatory pressure around the fairness and transparency of premium finance.
Motor insurance customers account for the bulk of the savings, with around £82.4 million saved across the market, or equivalent to £6.54 per insured vehicle. Home insurance customers saved nearly £24 million, or £2.78 per household. The figures are based on Consumer Intelligence’s Insurance Behaviour Tracker, which monitors customer-reported premiums and payment methods.
Meanwhile, the proportion of customers paying for car insurance in instalments rose from 25% in late 2021 to 42% by late 2024. In home insurance, monthly payments increased from 31% to 46%, affecting approximately 8.6 million homes.
Beyond instalment costs, the wider UK insurance market has seen contrasting trends in premium levels. Comprehensive car insurance premiums have been falling, with a 6% decrease (£59) between April and June 2024, bringing the average premium to £882. The decline continued into the third quarter, with a further 2.3% drop (£21), lowering the average to £861, according to data from WTW.
In contrast, home insurance premiums have come under upward pressure. Industry-wide underwriting losses, inflation in claims costs, and supply chain disruption have all contributed to rising prices.
In 2023, UK home insurers reported a net combined ratio of 118%, signalling losses on core underwriting activity. According to projections reported by the Financial Times, average home insurance premiums are expected to increase by 19% in 2024, followed by a further 7% rise in 2025.
The Financial Conduct Authority has also turned its attention to premium finance arrangements, questioning whether they offer fair value, particularly for customers facing financial vulnerability.
With more than 20 million policyholders using credit to pay for insurance, the regulator is assessing whether current practices align with its Consumer Duty rules.
