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FCA now asks every Gap Insurance provider to pull product from market

  • FCA says entire Gap Insurance market has now been asked to pause sales
  • Sales will stop from the end of March in phased withdrawal
  • Watchdog will hear from industry on how it plans to improve Gap value to customers
  • FCA says it ‘does not want to ban Gap’ sales, but the product must offer more

Time 11:30 am, March 4, 2024

The Financial Conduct Authority has today asked all Gap Insurance providers to pause sales of the product while it investigates further.

The FCA said it had sent requests to the last remaining providers of the product to halt the sale of the insurance by the end of this month.

Last month, some 80% of the Gap market was pulled as insurers withdrew their products following FCA advice. Now, the remaining 20% have complied too.


The city regulator is concerned Gap is not currently offering ‘fair value’ to customers and has said it wants to ‘see improvements’.

Car dealers earn high commissions from the sale of Gap – sometimes as much as 50% – and it is believed the FCA is concerned with the value dealers add to the product. 

Gap covers the difference between the amount buyers paid for a vehicle, or owe on finance, and the amount a car insurer would pay out for it in the event of the car being written off or stolen.


It’s designed to cover the shortfall – or ‘gap’ – created when a customer may owe more on a finance agreement than the insurer is willing to pay out for their car.

The policy typically costs a few hundred pounds and is often a lucrative extra revenue stream for car dealers when sold on top of finance agreements.

The FCA says it is not planning to ban the product and is ready to review revised proposals from the insurers on how they are going to improve the product.

However, until those changes are made car dealers will not be able to sell the product to customers as supply is restricted.

An FCA spokesperson said: ‘Following our agreement with the largest Gap providers last month, we have sent further requests to the remaining providers to pause sales of Gap insurance.

‘Gap insurance can provide a useful service to customers, but in its current form it does not offer fair value and we want to see improvements.

‘We are working closely with Gap insurers to resolve these issues as quickly as possible, so that customers can access fair value products that meet their needs.’

Car Dealer exclusively revealed in January that the FCA had written to insurance providers warning them it may ‘intervene’ in the market and asked them to voluntarily withdraw their products from sale.

Two weeks later the FCA confirmed it had asked insurers to suspend sales immediately following promises it planned to intervene in the market if changes weren’t made.


At the time, Sheldon Mills, executive director of consumers and competition, said: ‘I welcome the agreement by firms providing Gap insurance to pause sales while they work on improving value for customers. 

‘Gap insurance can provide a useful service to customers, but in its current form it does not offer fair value and we want to see improvements.  

‘We will continue to work closely with firms as we carry out further engagement to resolve these issues and ensure customers are getting fair value products that meet their needs.’

While the FCA has stopped short of calling the move a ‘ban’, the industry said it was one in ‘all but name’ as the sale of the product has now stopped. Insurers are now liaising with the FCA to work out what changes it wants to the product to allow it to be sold again.

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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