Insurance experts are calling for major changes to take place in a bid to help drivers dealing with overwhelming costs amid fears poorer motorists are being hammered.
The Association of British Insurers (ABI) has committed to action by aiming to manage the amount that people pay for their motor coverage every month and ensure they are not charged extra.
The new Premium Finance Principles outline that drivers should clearly be told what they will be paying every month to boost transparency in the sector.
It is calling for insurers to provide a clear comparison of the total cost of paying annually and the total cost of paying monthly before drivers agree to the terms.
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The ABI is calling on greater transparency among insurers with prices
GETTYThe ABI is also demanding that insurers understand that often, drivers choose to pay monthly because they cannot afford to pay in one lump sum.
Mervyn Skeet, director of general insurance policy at the ABI, spoke about the need for intervention to help drivers deal with soaring costs.
He 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."
“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."
The expert also called on the Government to reduce the rate of Insurance Premium Tax (IPT), which is applied to all coverage for drivers.
He highlighted how this was still being levied at a time when the Government is bringing in "record tax revenues" from higher prices.
The rate of IPT currently stands at 12 per cent and adds around £67 to the average car insurance policy.
Skeet has previously said that the premium tax hammers those on lower incomes because they tend to spend more on insurance, including home and motor coverage.
As part of the plans for a fairer insurance sector, the trade association aims to publish a report by the summer of 2025 on the impact of the principles.
Commenting on the new principles, Michael Foote, founder of Quotegoat.com, said: “The Association of British Insurers has finally taken meaningful steps to ease the financial strain on drivers who can’t afford to pay for their insurance in one lump sum.
"Insurers should recognise the challenges faced by those unable to pay upfront and opt for paying monthly - taking advantage of their situation is simply unacceptable and I hope providers found to be doing so will face consequences.
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Poorer drivers are often forced to pay monthly because they cannot afford the lump sum
PA“Make it a habit to compare the price of your car insurance every year using comparison sites - never automatically take the first price you’re offered to automatically renew - it’s seldom the best price you’ll get.
"If you find a better offer elsewhere, don't be shy about negotiating with your current provider. It’s about time we hold our car insurance providers to account."