In February 2026, the FCA published MS24/2 Premium Finance Market Study: Final Report. The study represents a detailed examination of the UK premium finance market, with particular focus on motor and home insurance. Premium finance allows customers to pay insurance premiums in instalments rather than upfront, typically with interest applied.
The FCA’s review was initiated amid concerns that competition in this market may not be functioning effectively and that some customers, particularly those in financially vulnerable circumstances may not consistently receive fair value. The Final Report sets out the FCA’s conclusions following its interim findings, supervisory engagement, and market analysis.
Key Findings
- Market Context and Consumer Importance
In 2023, 48% of motor and home insurance policies were financed through instalments. While premium finance enhances access to insurance, interest charges mean some consumers pay significantly more.
- Fair Value and Consumer Duty Considerations
The FCA assessed whether costs were reasonable under the Consumer Duty. Average APRs dropped from 23.3% in 2022 to 19.2% in 2026, saving consumers an estimated £157 million annually, partly due to supervisory engagement and firms adjusting pricing models.
- Pricing Models and Market Structure
Both interest-bearing and 0% APR models can deliver fair outcomes if designed transparently and competitively. No market-wide APR caps were deemed necessary.
- Commission Arrangements and Distribution Dynamics
Broker-distributed products generally have higher APRs. Commission arrangements may pose conflicts of interest, but the FCA found no systemic harm. Firms must ensure commissions align with fair value delivery.
- Supervisory Approach and Ongoing Monitoring
The FCA will continue monitoring pricing, APRs, and distribution practices. Firms must ensure offerings remain compliant and defensible under the Consumer Duty.
Implications for Firms
For insurers, lenders, and brokers, the Final Report reinforces several core compliance expectations:
First, firms must maintain robust fair value assessments, supported by data and documented governance. Pricing decisions should be clearly justified, particularly where APRs materially exceed market averages.
Second, distribution oversight remains critical. Firms must understand how premium finance products are offered across channels and ensure that broker relationships and commission models do not distort outcomes.
Third, firms should enhance monitoring frameworks to track customer impact metrics, vulnerability indicators, and APR dispersion across cohorts.
Finally, boards and senior management should ensure that premium finance is embedded within Consumer Duty governance structures, with appropriate reporting and challenge mechanisms.
Conclusion
The FCA’s Premium Finance Market Study underscores the regulator’s continued focus on pricing fairness, transparency, and consumer outcomes within the insurance sector. While the FCA has not imposed new market-wide interventions, it has signalled clearly that premium finance pricing must withstand scrutiny under the Consumer Duty.
For firms, the message is unequivocal: premium finance remains permissible and valuable, but pricing strategies, commission structures, and governance frameworks must demonstrably align with fair value principles. Ongoing monitoring and proactive compliance engagement will be essential to mitigate regulatory risk in this evolving area.
How Complyport Can Help?
At Complyport, we help firms manage evolving regulatory reporting requirements by:
- Regulatory Engagement and Supervisory Readiness: We help firms prepare board briefings, regulatory submissions and responses to FCA engagement exercises. Our guidance ensures firms can demonstrate proactive oversight, fair value assessments, and alignment with Consumer Duty requirements.
- Consumer Duty and Fair Value Frameworks: We assist in embedding fair value principles into pricing, distribution, and commission arrangements. This includes documenting governance, monitoring outcomes, and ensuring senior management accountability across all premium finance products.
- Monitoring, Reporting, and Risk Oversight: We help firms implement robust monitoring frameworks to track APRs, customer outcomes, vulnerability indicators, and broker practices. Our tools ensure clear reporting to boards and regulators, evidencing defensible and compliant premium finance offerings
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