The Financial Conduct Authority says it has launched a review into the insurance sector amid concerns about “rising prices” across the home and car markets.
The City regulator says the industry’s premium finance products allow over 20 million customers to pay for insurance in instalments.
It adds that the average yearly rate on the amount of money borrowed on these deals ranges between 20% to 30%, but the watchdog “is concerned that premium finance may not be providing fair value”.
The body points out that its research shows that 79% of adults in financial difficulty have used these products.
The review will cover “whether the products represent fair value, how well customers are made aware of their financing options, the role of commission, and other potential barriers to effective competition in the motor and home premium finance market”.
Financial Conduct Authority director of competition Graeme Reynolds says: “People rely on premium finance to spread their insurance costs by paying in smaller monthly payments.
“We want to ensure that competition works well and make it easier for consumers to find the best deals.”
The regulator’s review will work alongside a motor finance taskforce set up by the government today.
Transport secretary Louise Haigh and economic secretary to the Treasury Tulip Siddiq say the new body will include such groups as the Association of British Insurers, Citizens Advice, Which? and Compare the Market, “as well as insurance regulators, to tackle spiralling costs of car insurance”.
Motor insurance premiums have jumped by an average of 21% since June 2022, according to Financial Conduct Authority data.
