The Financial Conduct Authority has raised concerns that some insurers may be profiting excessively from premium finance, as it continues its investigation into whether customers paying monthly for insurance are receiving fair value.

In an interim update to its ongoing market study, the regulator said while premium finance can help make insurance more affordable and flexible, some firms appear to be earning significantly more than it costs to provide these arrangements. The FCA said it will explore these concerns further in the next phase of its study and address any issues it identifies through the Consumer Duty. A final report is expected by the end of 2025.

The regulator added that premium finance practices must align with existing FCA rules, particularly around fair value, transparency and customer understanding.

Responding to the update, Hannah Swain, head of UK personal lines pricing, insurance consulting and technology at WTW, said: “While the market study update will allay insurance providers’ fears of any major interventions regarding premium finance provision, the update reiterates that practices need to be aligned with existing FCA rules and guidance outlined within Consumer Duty. This includes the requirement to provide customers with fair value and a clear understanding of insurance and credit products.

“There is a need for the market to continue to engage with this market study to demonstrate that the current regulatory framework is sufficient to ensure positive outcomes for all consumers considering insurance premium finance."

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