Premium finance: Are your customers getting fair value?

The Financial Conduct Authority (FCA) has just released its much-anticipated final report on the Premium Finance Market Study (MS24/2), published on 3 February 2026. The Market Study was launched over concerns by the FCA that some customers were not getting fair value and that competition was not functioning effectively. While the report acknowledges that the market is serving many customers well, it also highlights the ongoing issue of high prices. The FCA is now calling on all firms to take a hard look at their premium finance offerings and consider what further steps are needed to ensure they deliver fair value in line with regulatory expectations.

Background

The FCA launched the market study in October 2024, stating it had concerns that motor and home insurance premium finance products were priced too high relative to the associated credit risk. In July 2025, the FCA published an interim report which found that some home and motor insurance premium financing costs were high and proposed a closer examination of price setting processes to ensure that providers were offering fair value to consumers.

Final findings

The final report's findings are largely positive, with the FCA concluding that the market is broadly meeting the needs of many customers. Since 2022, average APRs for premium finance have fallen by 4.1 percentage points, with direct regulatory engagement leading to even greater reductions for some firms. This equates to annual savings of about £157 million for customers. The FCA credits these improvements to the Consumer Duty, which requires firms to ensure products provide fair value, and to increased regulatory scrutiny. The FCA found no evidence of credit risk being double counted and priced into both the premium and premium finance. 

The report further concludes that both interest-free and with-interest premium finance pricing models can deliver fair value, provided firms properly assess and justify their pricing. Given that customers choose policies based on the total price, and providers of both with‑interest and interest‑free models are incentivised to keep these low to appear higher up in rankings, the FCA found that both pricing models are compatible with the Consumer Duty as customers are effectively able to compare and make informed decisions.

However, the report highlights that high prices persist and that this is an area that the regulator will look at more closely and intervene if necessary. Firms must ensure that the total price a customer pays for premium finance is reasonable relative to the overall benefits received. This is central to the Consumer Duty’s fair value outcome. Firms are required to produce and maintain robust Fair Value Assessments in line with FCA Handbook requirements. These assessments must consider not just price, but also product quality, customer support, and consumer understanding. The report highlights examples of good and poor practice in fair value assessments and stresses the need for ongoing compliance with Consumer Duty, fair value and competition law requirements.

Fair Value Assessment: What good looks like? 

• Identifying different customer motivations (preference vs. necessity) to better serve and price for each group.
• Recognising and explaining niche customer segments, using analysis to justify fair value and pricing, especially for higher-risk customers.
• Objectively assessing the costs to the customer, including all aspects such as APRs and fees. Examples include- a detailed breakdown of costs, including variable and fixed costs per‑policy, a clear justifiable explanation for APRs, and a full analysis of any fees charged in terms of both the cost to administer services and the benefit that customers would derive.
• Considering the quality of the product beyond the core benefits it provides. This could be achieved by analysing complaint levels and conducting root cause analysis to understand how customers perceive their premium finance products. 
• Ensuring processes support proactive identification of customers displaying characteristics of vulnerability (in addition to customers being able to self‑identify) and creating tailored customer journeys, including enhanced approaches to arrears management.

Next steps

The FCA has said that it will not make any rule changes or other market wide interventions at this stage such as APR caps or a ban on commissions, warning that such measures could reduce access to insurance, especially for high credit risk or vulnerable customers. Instead, it will continue to monitor the market, focusing on outlier firms and using Consumer Duty and supervisory tools to drive improvements. 

The regulator expects all firms to consider whether further changes are needed to their premium finance offerings to meet fair value requirements and confirms that it will pursue stronger supervisory action to address concerns around the provision of fair value. Premium finance lending firms must embed the Consumer Duty into their culture and operations, ensuring fair value, transparency, and good outcomes for all customers, especially those in vulnerable circumstances. This involves robust and ongoing fair value assessments, effective communication, responsible commission structures, and close collaboration across the distribution chain, with a readiness to respond to FCA supervision and market developments. Failure to meet these standards may result in targeted FCA interventions.