Motor and home insurers’ APRs revealed as FCA action demanded

Multiple home and motor insurers are charging “excessively high amounts of interest” for consumers paying monthly, Which? has claimed.

The consumer champion said current interest levels were “effectively penalising many customers who pay monthly because they cannot afford to pay for a year upfront”.

Which? researchers asked 49 car and 48 home insurers how much interest they charged customers to pay for cover monthly.

According to its figures that were published today (13 September 2024), the average annual percentage rate (APR) across motor insurers was 22.33% and 19.83% across home insurers.

Of firms that responded to its survey, Which? found that Co-op Insurance charged the highest APRs for both car and home insurance at 29.89%.

For motor, the AA, Hastings Direct, InsurePink and People’s Choice all charge an APR of 26.9%. The Green Insurer and Santander charge rates of 26.6% and 26.5% respectively.

In the home area, the AA and Hastings Direct have APRs of 26.9%, while 1st Central has a rate of 25%.

Meanwhile, two car insurers – NFU Mutual and Hiscox – do not charge any monthly interest, while this is also the case for 19 home insurers.

They include Age Co, Bank of Scotland, Halifax, John Lewis, Lloyds Bank, MBNA, M&S Bank, Nationwide Building Society, NFU Mutual, SAGIC, Sainsbury’s Bank, Santander, TSB, Yorkshire Building Society, Hiscox, HSBC, Natwest, RBS and Urban Jungle.

Which? also did a mystery shop of the car insurers that did not respond and found that a handful had charged higher rates than found among those that had responded to its survey.

“Four firms charged rates far above the industry average based on the rates provided,” it said.

Action demanded

In April 2024, the ABI said members would follow new steps to manage the amount of money drivers are charged for paying their motor insurance monthly instead of annually. 

Now, Which? has urged the FCA to publish an action plan that includes a deadline for when it will stop insurers charging “excessive” monthly interest rates.

It also said the regulator “should collect data on the cost to firms of providing premium finance and the difference in their profit margins between customers paying monthly and those paying annually”.

Rocio Concha, Which? director of policy and advocacy, added: “Many customers who pay for home or car insurance monthly don’t do so out of choice, but financial necessity. That these same customers can end up paying over the odds compared to those who pay for cover annually is blatantly unfair. 

“This is not the first time Which? has sounded the alarm over eye-watering levels of interest, yet excessively high rates persist.

“Car and home insurance policies aren’t nice to haves, but essential for motorists and homeowners. It’s high time for the FCA to take meaningful action against firms that continue to charge high rates and end this injustice.”