’The principles announced today are one of a raft of actions we are taking to tackle the cost of motor insurance,’ says director

Members of the ABI will follow new steps to manage the amount of money drivers are charged for paying their motor insurance monthly instead of annually. 

According to the association, the premium finance principles underline what fair practice should look like and revolve around five elements.

This includes transparency, affordability, fair value, proportionality and accountability.

By following these steps, the ABI said that any charges for spreading out payments should be made “completely clear” to consumers and be reasonable, relative to the cost incurred by the insurer for providing the option.

Mervyn Skeet, director of general insurance policy, said: “The principles announced today are 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.

“We are doing all that we can within our reach as a trade body for insurers and hope that other organisations involved with premium finance follow our lead.”


The came after the ABI set out the steps the industry was taking to combat the rise in the cost of motor insurance at its conference in February 2024.

As part of this, the ABI said it was in discussions with the FCA and members on possible industry action on premium finance.

“While a voluntary industry-led cap on premium finance charges was considered and discussed with the FCA, the principles represent what is possible within the limits allowed by competition laws and provide a basis for firms to take meaningful action,” the ABI said.

Skeet added: “We’re also looking to investigate policy steps that could help low-income households specifically, as well as deliver on our broader roadmap to tackling costs.

“This includes a call on the government to reduce insurance premium tax (IPT), especially when they are bringing in record tax revenues as a result of higher prices.”

Below are the premium finance principles by the ABI:

1. Transparency: ”When setting out any cost for paying by monthly instalments, insurers should provide a clear comparison of the total cost of paying annually and the total cost of paying monthly. Insurers should also publish up-to-date, clear information about their common or average premium finance charges.”

2. Affordability: ”When deciding on their premium finance offering to customers, insurers should have regard to the fact that many consumers cannot afford to pay for their insurance up front, in one lump sum and so charges for paying by monthly instalments can fall hardest on those who can least afford it.”

3. Fair value: ”Insurers must ensure that costs associated with monthly instalments represent fair value. As part of this, insurers should consider how any income from premium finance compares to their income on the core premium.”

4. Proportionality: ”Insurers should ensure that charges are reasonable, relative to the costs of providing premium finance for monthly payments. Insurers should also consider charges relative to comparable and accessible alternative payment options, such as a credit card.

5. Governance and Accountability: ”Insurers must regularly review the cost to customers of premium finance, using suitable information or data to ensure any charges remain appropriate. They should ensure the right level of senior management accountability for their approach taken on premium finance charges and its impact on consumers.”