Source: Which?, "Which? calls for ban on motor insurers charging 'poverty premiums' of as much as £370 a year", published 14 October 2026, as reported by MoneySavingExpert.
Our view
Paying monthly for car insurance is not the mistake here. The mistake is paying monthly without ever being told the price of doing it. Which? found two insurers charging nothing extra at all for the same choice that costs a customer of another insurer hundreds of pounds a year — which means this isn't really about budgeting discipline, it's about which company's name is on your renewal letter. That is fixable with one phone call and five minutes, and it costs nothing to make.
What Which? found
Which?'s mystery shopping exercise collected 36 quotes from 30 motor insurance providers and found a huge spread in what paying monthly actually costs. At the expensive end: City Insurance at 53% APR, UDrive Cover Ltd at 50%, Sterling Insurance at 38%, Rightsure at 34% and Acorn at 33%. Santander and Post Office both came in at 26.5%, close to the median across all 36 quotes of 26.2% — itself roughly in line with the median credit card APR in October 2026 of 25.9%, according to the same reporting. At the cheap end, Marshmallow and Motorcade both charged 0% APR for the monthly option on the quotes Which? checked.
Put plainly: the worst insurers in this research charge roughly double what you'd pay borrowing on an ordinary credit card, for the exact same thing — spreading a cost over the year — that two other insurers do for free. Which? is calling on the government to ban insurers from charging extra for paying monthly at all, and to require every insurer to offer a monthly option in the first place.
Why paying monthly costs more in the first place
Car insurance is sold as a single annual contract. If you choose to pay monthly, the insurer isn't simply dividing that annual price by twelve — in almost every case, a separate loan is arranged, often through a premium finance company the insurer works with, which pays the annual premium in full on your behalf and then collects it back from you over the year, with interest. That loan is a regulated consumer credit agreement in its own right, with its own APR, sitting on top of the insurance itself. Which?'s findings suggest that APR is often not volunteered when you're quoted — you have to ask for it.
This is Which?'s own reported example from its research, not a hypothetical.
- Paid annually, in one go: £2,583.23.
- Same policy, paid monthly instead: £2,950.98 — £367.75 more, for no change to the cover itself.
- Spread across 12 months, that's roughly £30.65 a month of pure financing cost — not insurance, not admin, just the price of choosing monthly over annual.
- Against ONS's own figure for average UK household spending, £676.60 a week, £30.65 a month is a small slice of a typical budget on its own — but it buys the household nothing whatsoever. It is money that exists purely because of how the bill was timed.
That £30.65 a month is the entire reason this is worth five minutes of a phone call. It is not insurance. It is not risk. It is the cost of one insurer's finance arrangement, and a different insurer would not have charged it at all.
What it means for your household this week
If your car insurance renewal is due soon, the comparison that matters is not "can I afford the monthly amount" — it's the gap between the monthly total and the one-off annual price, expressed as a rate. If you're already mid-policy and paying monthly, you can still ask your insurer for the representative APR you're on; you don't have to wait for renewal to find out, even if you can't change it until then. Either way, this is one of the few costs on a household bill where the same cover, from a different provider, can genuinely cost nothing extra for the same choice.
What to do this week
- Ask for the APR, not just the monthly price. When you get a renewal quote, ask the insurer directly: "what's the representative APR if I pay monthly?" Write the number down and compare it to the 26.2% median and the 25.9% credit card figure above.
- Weigh it against a 0% card, if you have one. If you hold a 0% purchase credit card and can clear it within 12 months, paying the annual premium on that card and repaying it yourself can beat an insurer charging 30%+ APR. See our guide to your credit report before applying for anything new, and treat it like any other debt you're committing to clear — our guide to clearing debt covers the discipline that takes.
- Don't auto-renew on the current insurer by default. Get both the annual and monthly price from at least two other insurers before your renewal date, specifically asking for the APR on each.
- If you can't pay annually this year, start planning for next year now. A small monthly sinking fund building toward next year's renewal — see our guide to building an emergency fund — means you're not forced into paying whatever APR your insurer sets a second year running.
What's still uncertain
Which?'s call is for government action, not a change insurers have agreed to make. Campaigners are pushing for this to be addressed around the Budget on 28 October 2026, but as of now no ban has been announced and the FCA has not committed to new rules specifically targeting monthly-payment APRs on insurance. City Insurance told Which? it is already reducing its rate to 36% — still above the market median — which shows pressure is having some effect, but there is no commitment yet that covers every insurer. Until that changes, the APR check above is the only lever a household has, and it works regardless of what the Budget does or doesn't contain.
For a wider look at your money, see our guide to budgeting. If money is tight, free, independent help is available today from MoneyHelper, StepChange and National Debtline.