UK drivers have been issued a new alert as consumer group Which? publishes research showing certain motorists still face steep interest rates when spreading car insurance costs. The watchdog found some insurers impose annual percentage rates (APRs) similar to costly credit cards.
High APRs on Monthly Payments
Which? discovered that some companies levy APRs approaching 30% on monthly motor insurance payments. Between February and March 2026, the group identified several firms charging APRs exceeding 25%, with some as high as 29.9%.
The organisation noted that monthly payment plans are often the only viable option for households under financial strain, effectively creating a 'poverty premium'. Two years prior, certain firms imposed rates above 35% APR, according to Which?.
Slow Progress
While some providers have since reduced rates, Which? believes the pace of change has been disappointingly sluggish. Between February and March, the consumer group attempted to reach 61 car insurance brands, enquiring about representative APRs charged to customers opting for monthly payments. A total of 48 responded with their rates or confirmed they did not impose additional charges for instalment payments.
Rocio Concha, director of policy and advocacy at Which?, said: 'Millions of motorists rely on monthly payments to afford essential car insurance cover, yet many are still being charged interest rates comparable to an expensive credit card.'
Industry Response
A spokesperson for the Association of British Insurers (ABI) said: 'The industry recognises that many households are under financial pressure and it understands why spreading the cost of cover is essential for many motorists. Premium finance is widely used across the market with charges that can differ between insurers and by product.'
'Our members remain committed to improving outcomes and this includes being open about the fact that providing this service involves genuine operational costs – including keeping cover in place for a period even when payments are delayed or missed.'
'Our premium finance principles make clear that any charges must be fair, transparent, and reflective of the costs incurred by insurers. The FCA's own market study found that premium finance can deliver fair value for consumers and that the overall cost of premium finance has fallen since 2022.'
