Insurers have promised to clean up their act after coming under fire over the “poverty premium”, whereby customers who cannot afford to pay for car insurance in one go are charged punitive interest to spread the cost. The Association of British Insurers (ABI) said its members had agreed to an action plan aimed at managing the cost of paying monthly for motor insurance. The pledges include companies giving customers clear cost comparisons between the two payment options and publishing the average finance charge. One of the tenets of what the ABI calls its premium finance principles is that when setting prices, insurers heed that “many consumers cannot afford to pay for their insurance upfront, in one lump sum, and so charges for paying by monthly instalments can fall hardest on those who can least afford it”. Insurers should also ensure charges are “reasonable”, relative to the costs of providing premium finance for monthly payments, the code says. And they should consider how the charges stack up against other payment options, such as using a credit card. Insurers give customers the choice of paying one annual premium or in monthly instalments. However, while the monthly payments are lower, the overall cost...