Britain’s insurers have been told by their own trade body to keep premium rises “reasonable” after a wave of complaints about the rates charged for monthly payments.
In a statement of principles published today, The Association of British Insurers (ABI) said payments on monthly instalments or premium finance must be comparable with other options such as a credit card.
Costs involved in spreading out payments must be made clear, said the trade body, after recent reports that some insurers charge as much as 30% more for paying costs of paying monthly instead of upfront.
Insurers must ensure costs associated with premium finance - payment in monthly instalments - represent fair value, said the guidance for members.
Mervyn Skeet, head of general insurance policy at the ABI, said the trade body's new principles were "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".
Monthly payments incur more administration costs for insurers than annual payments and don’t cash them an upfront sum to invest elsewhere.
Motor insurance premiums rose by 25% last year, the ABI said.