Britain’s worst insurers named & shamed for hitting customers with crippling interest rates – do YOU need to switch?

BRITAIN’S insurers have been called out for continuing to charge customers exorbitant interest rates simply for opting to pay monthly.

Consumer champion Which? asked 52 car insurers and 46 home insurers what rates of interest they charged customers to pay for cover monthly.

The Financial Conduct Authority’s Financial Lives Survey reveals that over 20 million people rely on premium finance to pay for their insurance.

Many opt for this payment method as they find it difficult to afford the full annual cost of cover upfront.

However, research by Which? has revealed that many insurers are imposing steep interest rates on these instalment plans, potentially penalising customers who are unable to pay for a year’s cover in one go.

The APR across car insurers was 22.84% and the average APR across home insurers was 21.59% – but a number of providers charge significantly more.

Among the insurers that responded, Which? identified the highest APRs being charged by One Insurance Solution and The Insurance Factory.

One Insurance Solution applied rates of 30.72% to 34.08% for home insurance, while The Insurance Factory imposed the same rates for car insurance.

The consumer group highlighted that these rates are comparable to the borrowing costs of credit cards (35.42%), despite credit card providers taking on significantly higher risks when extending credit.

This is due to the fact that credit card providers risk losing any remaining balance if customers fail to make their payments.

In comparison, insurers have the option to cancel a policy if a customer fails to keep up with payments.

Rocio Concha, Which? director of policy and advocacy, said: “People often don’t pay for car and home insurance in monthly instalments out of choice, but financial necessity.

“For millions to be hit with excessive extra charges due to their circumstances seems like kicking customers when they are down – and this is exactly the kind of unfairness the regulator should have in its sights. “

The expert said the UK’s fiance watchdog is “now looking into this issue”.

Concha said that the UK’s financial watchdog, the FCA, is “now looking into this issue.”

The regulator is conducting a market study into the pricing practices surrounding premium finance, with its findings expected this summer.

She added: “The regulator must get to the bottom of what fair rates of interest are by gathering information from firms on profit margins and commission levels.”

The Insurance Factory charges the highest interest for monthly car insurance payments, with an APR of 34.08%, followed by iGO4 at 30%.

Several others, including Dial Direct, Nutshell, and Zenith Insurance, charge slightly lower but still substantial rates of 29.9%.

Most brands with the highest APRs on repayments are connected to Markerstudy Distribution, a broker – and its parent organisation – Markerstudy Group.

A Markerstudy Distribution spokesperson told Which? that it had reduced rates of several of its brands – with further reductions planned in the coming months.   

One Insurance Solution charges the highest interest for monthly home insurance payments, with an APR of 34.08%.

Co-op Insurance follows with an APR of 29.89%, while Swinton and 1st Central charge 26.9% and 25%, respectively.

Several others, including Privilege, Yorkshire Building Society (Uinsure), and Hastings Direct, also impose notably high rates.

Thirty home insurers responded to surveys conducted in August 2024 and February 2025.

Of these, three insurers (1st Central, Admiral, Hastings Direct) decreased their rates during this period, and Ecclesiastical stopped charging altogether at the beginning of March (having previously charged between 8.26% and 13.44%).

Ecclesiastical’s decision means there are now 19 providers that do not charge interest and raises questions about why other firms cannot follow suit. 

CUT YOUR COSTS

The simplest way to avoid paying extra interest on your car or home insurance premium is to pay annually.

However, not everyone can afford to pay the full amount upfront – but there are alternatives.

James Daley, managing director of Fairer Finance, suggests considering a 0% interest credit card to cover the cost of your insurance.

This allows you to pay the premium in one go and then gradually repay the credit card balance before the 0% interest period ends.

It’s important to note that if you fail to clear the balance within the 0% interest timeframe, you’ll start accruing interest charges.

Therefore, this option should only be considered if you’re confident you can repay the full amount on time.

If this isn’t a feasible option, paying monthly will be your only alternative, Daley advises.

However, it’s important to shop around to ensure you’re not paying an excessive amount of interest.

Price comparison websites such as Uswitch, GoCompare, and MoneySuperMarket can help you search for some of the most competitive deals available.