Consumers continue to favour paying for their general insurance by monthly instalments rather than the traditional annual payments, according to a survey by banks Automated Clearing System.

For both buildings and contents insurance, more than half of buyers pay monthly (55% and 51% respectively), as opposed to 40% and 42% who pay annually.

Motor insurance still lags behind but the gap is narrowing with 39% choosing monthly instalments versus 56% preferring annual payments.

Monthly payments have always been more popular in health (80%) and life (86%) insurance.

Direct debit has strengthened its position as the most popular method of payment for general insurance. Between 90% and 95% of monthly payments for motor, contents and buildings insurance are now debited automatically from customer accounts. This represents part of a long-term trend over the past decade.

During this time, the proportion of monthly payments in motor insurance has quadrupled; in contents insurance, it has trebled; and in buildings insurance, it has more than doubled.

Premiums paid by direct debit are larger than those paid by other methods, indicating that customers use instalments to spread the cost of payment and to maintain or increase the level of cover.

The use of direct debit has increased across all demographic groups, with only social group E and the over 65s using them to a lesser extent.

These increases in direct debit payments have happened despite the overall decline in commitments in the insurance market since 1996.

House contents insurance again saw a decline in 1999, with a further fall of 500,000 commitments. Motor insurance and buildings insurance commitments stayed relatively stable.

Average prices in the industry have remained steady, despite increasing costs. This is largely due to the competitive nature of the market.

In motor insurance the average price in 1999 fell to £260, from £268 in 1998. The average house insurance price remained steady at £114 and buildings insurance saw a slight drop to an average of £174.