Which? investigators uncovered that certain car insurers apply APRs as high as 39.11%, with an average rate of 23.37% across 27 providers. However, obtaining this information proved challenging, as ten insurers declined to disclose their rates.

One insurer, Markerstudy, defended its practices, stating it regularly assesses its rates to ensure fair value. Similarly, Axa argued that using representative APRs for comparison may be misleading due to different calculation methods.

These findings echo previous research by Which? highlighting how monthly instalments can significantly inflate insurance costs. For instance, an 18-year-old driver faced a staggering £504 extra when opting to pay monthly for a policy with an APR of 36.32%.

Which? asked 39 car insurers what APRs were being applied to monthly payments and where there was more than one rate, what made the difference.

The highest rate was 1st Central’s 39.11 per cent - it charges between 5 per cent and 39.11 per cent, giving each customer a personal interest rate after a credit risk assessment.

Only two car insurers involved in the survey - NFU Mutual and Hiscox - said they did not charge interest on monthly repayments.

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Ten car insurers - AXA, Budget, Dial Direct, Esure, First Alternative, Geoffrey Insurance, Nutshell, Sheilas’ Wheels, Swiftcover and Zenith - refused to disclose their rates to Which?

The disparity between insurance APRs and credit card rates, despite lower risk to insurers, has drawn criticism. Matt Brewis of the FCA described premium finance as "a tax on being poor," emphasising the burden on those unable to pay annually upfront.

While regulations require insurers to offer fair value, Which? contends that high interest rates disproportionately affect customers paying monthly. Consequently, the consumer advocate urges the FCA to take decisive action and publish a league table of providers' APRs to promote transparency and fair competition.

Rocio Concha, Which? Director of Policy and Advocacy, stresses the urgency for regulatory intervention to prevent exploitation of financially vulnerable consumers. Concha will address these concerns before the Treasury Select Committee, advocating for a fairer insurance landscape that prioritises consumer welfare.