The UK Financial Conduct Authority (FCA) published its final findings from its landmark Premium Finance Market Study in February 2026, confirming that the average annual percentage rate (APR) on insurance premium finance has fallen by 4.1% since 2022, driven by Consumer Duty supervisory pressure. The regulator stopped short of imposing a sector-wide APR cap but committed to continued targeted enforcement and monitoring, maintaining pressure on firms that are not delivering fair value.
The UK's Financial Conduct Authority (FCA) has published the final results of its Market Study into insurance premium finance (MS24/2, February 2026), resolving a major question that had preoccupied the UK insurance industry for several years. Premium finance — which allows consumers to pay for motor and home insurance in monthly installments rather than as a lump sum — was used in approximately 48% of motor and home policies in 2023. The key concern was whether consumers paying monthly were receiving fair value relative to the credit costs charged.
The FCA found meaningful improvement: average APRs on premium finance products have fallen by 4.1% since 2022, a decline the regulator attributed directly to the supervisory scrutiny of its Consumer Duty regime, which came into force in 2023. Firms have also introduced internal policies to improve fair value assessments. However, the FCA noted that some consumers are still paying higher prices than can be justified, particularly through broker-linked finance arrangements, which remained more expensive on average — though not found to be systematically harmful.
Despite these concerns, the FCA concluded that sector-wide interventions — such as a mandatory APR cap or commission bans — were not appropriate at this stage. The regulator determined that such mandates would risk reducing market access and increasing premiums, potentially harming the consumers they were designed to protect. Instead, the FCA committed to ongoing monitoring of pricing through regulatory data, direct supervisory engagement with outlier firms, and continued use of Consumer Duty powers to drive fair value outcomes.
The FCA's Premium Finance report is one component of a broader 2026 regulatory agenda that also includes a planned consultation on updates to distribution chain responsibilities, a review of insurance-based investment products, and an annual Consumer Duty board report obligation that all regulated firms must now prepare. The message to the industry is clear: the era of outcomes-focused regulation under Consumer Duty is intensifying, and the FCA will act directly where harm is identified.
Key Points
- 1FCA's Premium Finance Market Study found average insurance premium finance APRs have fallen 4.1% since 2022
- 2Premium finance is used in approximately 48% of UK motor and home insurance policies
- 3No sector-wide APR cap or commission ban was imposed — the FCA opted for targeted supervisory engagement
- 4Broker-linked finance remained more expensive on average but was not found systematically harmful
- 5Firms must continue fair value assessments under Consumer Duty or face direct FCA enforcement
Why This Matters
The FCA's decision not to impose a sector-wide APR cap is a significant relief for UK insurers and brokers, but the ongoing supervisory pressure means the cost of non-compliance is rising. For UK consumers paying monthly for insurance — roughly half of all motor and home policyholders — the 4.1% drop in average APR represents real savings. The outcome also sets a precedent for how Consumer Duty will be applied across other insurance sectors, signalling that the FCA prefers outcomes-based engagement over blanket rules.
Original Source
Financial Conduct Authority (FCA) / Clifford Chance ↗Related Stories
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