FCA takes action: insurance firms halt GAP insurance sales

The Financial Conduct Authority (FCA) has successfully persuaded several insurance companies to suspend the sale of Guaranteed Asset Protection (GAP) insurance. This decision comes in response to concerns regarding the fairness of this insurance product for consumers. 

GAP insurance, often bundled with car finance deals, aims to cover the disparity between a vehicle’s remaining finance balance and its depreciated market value in case of theft or write-off. However, the FCA has raised doubts about whether consumers are receiving adequate value from these policies. 

Sheldon Mills, executive director of consumers and competition at the FCA, has voiced support for the temporary suspension of sales. He said, “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.” 

The FCA’s decision follows an analysis revealing that only a small fraction of premiums paid by consumers is actually used to settle claims. Additionally, a significant portion of insurance premiums is allocated to commissions for intermediaries. 

The FCA called on insurers to take action last year as they revealed concerns over the value of GAP products to consumers. 

This pause in sales is part of the FCA’s broader effort to enhance the transparency and value of insurance products. The FCA aims to ensure that consumers receive insurance solutions that align with their expectations and provide genuine benefits. 

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Josie Geistfeld Josie is an editor for Claims Media. She welcomes feedback, comments, and opinion at josie.geistfeld@barkerbrooks.co.uk