The Financial Conduct Authority published its final report on the UK premium finance market, concluding that existing Consumer Duty and fair value requirements can address concerns without new market-wide interventions such as a single APR cap, mandating 0% APR, or banning commission. The FCA instead signals continued targeted supervisory work on firms where pricing and fair value assessments appear out of line. Premium finance was used for around 48% of motor and home insurance policies in 2023, covering about 23 million policies. Across the FCA’s sample, average APRs fell by 4.1 percentage points since 2022, with estimated weighted-average savings of about GBP 8 per typical motor policy and GBP 3 per typical home policy, equating to approximately GBP 157 million per year across the market. More pronounced reductions followed direct supervisory challenge, with some firms cutting APRs by around 7 percentage points on average from 38% to 31% and, in some cases, moving towards a 0% model; the FCA also reports no evidence of credit risk being priced twice through both insurance premia and premium finance. The report highlights persistent high prices in parts of the market and discusses broker-distributed premium finance via specialist premium finance providers, including that broker commissions account for a substantial share of customers’ cost of credit in those arrangements. Next steps include ongoing monitoring of premium finance APRs through regulatory returns, continued scrutiny of firms’ fair value assessments and targeted supervision of outlier firms, and close monitoring of market impacts from Close Brothers Premium Finance’s withdrawal from retail-focused broker relationships. The FCA notes it may undertake further work if monitoring suggests supply chain contracts are inhibiting competition.

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