Money Wellness
Illustration of a young woman driving a car
category iconbills
calendar icon30 Apr 2024

ABI commits to tackling high cost of paying car insurance monthly – our verdict

Plans to tackle the high costs drivers are being charged to pay monthly for their car insurance have been announced by the Association of British Insurers (ABI).

This comes after research by Which? found insurers are charging ‘eye-watering interest’ to customers paying in instalments – a method of payment sometimes referred to as premium finance.

Revealing a set of five principles to try and manage the amount being charged for paying monthly, Mervyn Skeet, head of general insurance policy at ABI, said:

“The principles announced today are one of a raft of actions we are taking to tackle the cost of motor insurance, which we know is putting pressure on households, especially those on lower incomes.”

What are the new principles?

Transparency

Insurers are expected to make sure customers are aware of the difference between the cost of paying annually and monthly. They’re also being asked to publish their average premium finance charges.

Affordability

Insurers are expected to take into account that charges for paying monthly tend to affect the poorest customers.

Fair value

Insurers shouldn’t be making excess profits off the backs of those paying monthly.

Proportionality

Insurers should make sure that extra charges for premium finance reflect the additional costs associated with allowing a customer to pay in instalments.

Governance and accountability

Insurers are expected to regularly review the amount they’re charging for premium finance to make sure it’s fair.

Will these new principles make any difference?

The ABI said it will publish a report by summer 2025 on the impact these principles have had on costs for car insurance customers.

But, as far as we can see, there’s nothing revolutionary in here that insurers shouldn’t already be doing.

Without the introduction of specific measures as opposed to vague principles, we won’t be holding our breath for a significant drop in charges anytime soon.

What can you do to cut car insurance costs?

If the high cost of insurance is getting you down, see if you can save money with any of these tips:

Don’t auto-renew – shop around

Never immediately accept your insurer’s renewal offer. Find out what other companies are offering by approaching them direct or using price comparison websites.

Haggle

Even if you want to stay with your current provider, it’s always worth haggling. Do your research before getting in touch, so you can let them know what other deals are available to you.

Get quotes 23 days ahead of your renewal date

You’ll get the cheapest motor insurance quotes 23 days before your renewal date, according to Money Saving Expert. Save the date in your dairy!

Interest-free credit card

If you don’t have the cash to pay for your insurance in one lump sum, could you stick it on an interest-free credit card? For this to be a viable option, you’ll need to absolutely sure you can pay it all off before the interest charges kick in.

Add another driver

Having another named driver on your policy can reduce the cost. This will usually only work if they are considered low risk – so maybe someone with a long no-claims history.

Black box insurance

This type of insurance rewards you for safe driving with cheaper cover.

Avatar of Rebecca Routledge

Rebecca Routledge

A qualified journalist for over 15 years with a background in financial services. Rebecca is Money Wellness’s consumer champion, helping you improve your financial wellbeing by providing information on everything from income maximisation to budgeting and saving tips.

Related posts

bills

11 Jun 2024

Watch out for firms that could double your energy bills

An investigation has warned bill-splitting firms can mislead households into paying up to 107% more than average on energy bills, despite seemingly cheaper packages.

bills

04 Jun 2024

Energy debt is ‘trapping people in a cycle of misery’

People who fall behind with their energy bills are being trapped in debt and it's worse for those on prepayment meters, according to new research. Find out what to do if you’re in arrears and your energy supplier is pressuring you to move to prepayment.

bills

31 May 2024

Labour sets out plans to cut energy bills for good

Labour has outlined how it plans to boost the clean energy sector in the UK and bring down households' gas and electricity bills.

bills

24 May 2024

Average energy bills to fall by £122 a year

Energy bills for a typical household are set to fall by £122 a year in July. Find out what this is likely to mean for you and what help is available if you’re struggling to pay your gas and electricity bills.