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Car dealer warning as FCA targets GAP insurance that doesn’t ‘provide fair value’

  • FCA tells insurance firms they must prove they’re offering GAP customers fair value
  • It has given insurers a three-month deadline to prove their case
  • Some GAP insurers pay car dealers 70 per cent commission on GAP sales

Time 9:25 am, September 21, 2023

GAP insurance is the latest product to come under scrutiny by the Financial Conduct Authority (FCA).

The FCA says it will take ‘further action’ if firms fail to prove they are offering customers ‘fair value’.

Guaranteed asset protection (GAP) insurance is sold by car dealers to cover the difference between a car’s purchase price and its current market value should it be involved in an accident and written off.


It’s designed to cover the ‘gap’ between what an insurance company pays out and what may be outstanding on a finance agreement. The two might not always align, depending on when during the finance agreement the accident took place.

However, the FCA says that just six per cent of the amount customers pay in premiums for policies is eventually paid out. 

What’s more, the FCA says it has seen examples of some car dealers being paid as much as 70 per cent of the value of the premiums in commission.


GAP insurance is a useful up-sale opportunity for car dealers and is often sold alongside other products including paint protection.

The FCA has given firms a three-month deadline to prove customers are getting a fair deal or it will intervene. 

It has written to all insurance firms offering GAP and reminded them of their need to provide fair value to customers.

Matt Brewis, director of insurance at the FCA, said: ‘This is an early signal of the work we’ll be doing under the consumer duty.

‘Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided.

‘If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.’

A new consumer duty was introduced on July 31, requiring firms to put customers at the heart of what they do, from designing products to dealing with customers.

A spokesperson for the Association of British Insurers (ABI) added: ‘Our members fully understand the importance of providing fair value to customers and work hard to deliver it. 

‘We’ll discuss the FCA’s concerns with them to understand where any further action could be taken.’


Additional reporting: PA Media

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.



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