"GAP Insurance can provide a useful service to customers, and we continue to work with the rest of the market to address our concerns."
- Sheldon Mills, Executive Director of Consumers & Competition at the FCA
The sale of Guaranteed Asset Protection (GAP) Insurance was suspended by the majority of providers after the Financial Conduct Authority (FCA) forced an end to policies that don’t offer what Consumer Duty describes as ‘fair value’.
According to the FCA’s value measures data, there were over 2.4mn GAP policies in force during 2022. Yet, only 6% of the amount customers paid in premiums for GAP Insurance was paid out in claims, with some firms paying as much as 70% of those premiums in commission to parties involved in selling these products.
READ MORE: GAP Insurance sales suspended by 80% of providers
Last week, the FCA backtracked on this decision, permitting four firms to continue selling GAP policies. These firms are Fortegra Europe Insurance Company Ltd, Motors Insurance Company Ltd, Amtrust Europe Ltd, and Financial & Legal Insurance Company Ltd.
To restart sales, firms need to demonstrate that their GAP products provide fair value to customers, in line with FCA rules. The firms that have already resumed sales have done so with materially lower levels of broker commission, improving value for customers.
“We took action when our data showed that customers weren’t getting a fair deal. I’m pleased that, following constructive engagement with industry, a significant proportion of the market is now able to restart sales,” said Sheldon Mills, Executive Director of Consumers & Competition at the FCA.
