Eight out of ten insurance coverage corporations have agreed to pause gross sales of Assured Asset Safety (GAP) insurance coverage on the request of the monetary watchdog.

The Monetary Conduct Authority (FCA) mentioned it’ll perform a second spherical of discussions with these GAP suppliers that may proceed promoting the product though it mentioned that these have agreed to not use new GAP distributors within the interim.

GAP insurance coverage is usually bought alongside automotive finance. It covers the distinction between a automobile’s buy worth or excellent finance and its present market worth, within the occasion it’s written off earlier than finance has been repaid.

The FCA is nevertheless involved that the product is failing to offer worth and in September wrote to corporations asking them to take speedy motion to show clients are getting a good deal.

The regulator now says that after assessing responses, it was nonetheless not glad and that as a part of the request to pause gross sales, corporations have dedicated to make adjustments to their GAP merchandise.

This motion follows findings within the FCA’s newest truthful worth measures information, which exhibits that solely 6% of the quantity clients pay in premiums for GAP insurance coverage is paid out in claims.

It mentioned it had seen examples of some corporations paying out 70% of the worth of insurance coverage premiums in fee to events concerned in promoting GAP insurance policies.

Sheldon Mills, FCA govt director of shoppers and competitors, mentioned: ‘GAP insurance coverage can present a helpful service to clients, however in its present type it doesn’t supply truthful worth and we wish to see enhancements.” 

The regulator mentioned it’ll think about corporations’ proposals for various distribution channels, including that it recognises that some channels might be able to handle its issues extra rapidly.

The FCA added that it has carried out important work prior to now geared toward addressing points with GAP insurance coverage, together with a market examine on insurance coverage add-ons and introducing new guidelines particularly for GAP insurance coverage.

The FCA’s evaluation of the worth supplied by GAP insurance coverage consists of information going again to 2008 and {that a} 2014 market examine indicated that solely 10% of premiums had been paid out in claims, on common, between 2008-2012.

Since then, the FCA has launched guidelines strengthening how insurance coverage corporations ought to assess whether or not their merchandise are offering truthful worth.