The Monetary Conduct Authority has simply advised AM it has “no intention of banning GAP Insurance coverage”, in response to unsubstantiated stories that the product have to be scrapped this yr.

The insurance coverage trade regulator has made its considerations in regards to the gross sales practices round GAP insurance coverage for a number of years, and these days warned that prospects weren’t being given good worth from GAP, also referred to as return to bill (RTI) cowl.

It’s involved that GAP insurance coverage usually earns excessive revenues for insurers and their sellers/brokers, however lower than £1 in each £10 spent by shoppers on GAP is ever paid out to assist claimants, and it has warned the trade that it needed to see fast adjustments to provide prospects a good deal.

Since 2015 sellers had been required to provide automotive consumers a ‘cooling off interval’ earlier than promoting them GAP, as a result of the FCA recognized the sellers had been benefitting from a major benefit on the level of sale moderately than facilitating the shopper’s capacity to buy round for worth.

Dealerships had a 97% share of the GAP insurance coverage gross sales at that time, and the whole worth of the GAP insurance coverage market in 2014 was estimated to be £244.8 million..

At the moment, an FCA spokesperson advised AM, in an announcement: “We’re disillusioned with the market’s response to our warnings to enhance the worth of GAP insurance coverage for purchasers. We’ve got advised companies to take instant motion to point out how prospects are getting a good deal or we’ll intervene.

“We’ve got no intention of banning GAP insurance coverage as a product line.” 

Insurers have declined to speak brazenly about GAP. Some have already culled their GAP product.

Nonetheless one AM100 vendor, who most well-liked to not be named, advised AM: “I truly assume the product is an efficient one when it’s offered and priced in the appropriate manner.”

Nonetheless, the vendor stated he has not seen anybody volunteering to promote GAP in a different way, take a recent have a look at the product or to have a look at promoting it another way.

GAP suppliers are ready to see what the FCA does.

The vendor stated: “Nobody needs to promote one thing that has a whiff, a bit like PPI. I don’t assume there’s something mistaken with GAP as a product, I simply assume there’s an issue with the worth and price of fee.”

Some insurance coverage firms could also be watching the FCA’s present evaluate of historic motor finance discretionary fee agreements with curiosity, nevertheless, given that previously many sellers had been allowed to promote their GAP insurance policies at 60% to 70% revenue margins.

That evaluate was prompted by circumstances upheld by the Monetary Ombudsman Service, which dominated some prospects had been unfairly handled as a result of the vendor/dealer might incfluence their very own revenue earned from the product, with out the customer’s data.