Monday September 1st 2014, the first day of the brand new 64 plate registrations, brought an avalanche of sales at some of the leading Gap Insurance providers in the UK. Of course the beginning of a new registration plate will always bring a peak period of sales for the established names in the independent Gap Insurance market, perhaps even more so in 2014. The heavy media coverage of the ongoing FCA investigation into the sales of the likes of Gap Insurance, and the multitude of advice to look for independent solutions for much better value, may have influenced consumers to compare the motor dealers offer with products they can get online.
Often this simple task can save hundreds of pounds.
Business brisk for online Gap providers
The leading online brands we have spoken to have indicated that September sales of Gap Insurance have outstripped the first few days of March 2014 by some margin. Perhaps this is as a direct consequence of the general swing towards online providers.
It is interesting that feedback from consumers seems to also show a huge differential between motor dealers of even the same franchise, for the premiums they are currently offering for Gap Insurance. One consumer revealed that his franchise dealer of his £40,000 prestige new car had offered him a three year Gap Insurance policy for £800, yet another dealer he had spoken to offered him a policy for only £350. The gentleman in question was so concerned with the huge difference between seemingly the same policy that he did check independently, and was even more shocked to get cover for less than £160.
We understand that, privately, the FCA have expressed concerns about the premiums being charged in motor dealers. They have probed insurers on how they may be able to ensure that consumers are being offered better value for cover. However, of course there is a supply chain involved in getting the Gap Insurance from the underwriter to the consumer. This may involve an administrator, a provider (the manufacturer or a finance company), a motor dealer group, the motor dealer themselves and the the salesperson. Each and every step in this chain could add significant costs and commissions, meaning the cost to the consumer can be poor value.
Of course the trick is to eliminate as many of these potential links in the chain as possible. With online providers you may only find an insurer and the ultimate retailer of the policy in that chain, with the largest of the online retailers, and this inevitably means lower premiums and better value to the customer.
As the huge difference in premiums between two franchise dealers of the same manufacturer shows, still in 2014 the main reason for the huge price differentials may simply be down to motor dealer profit expectations.
Until the FCA bring in rules to curb this practice, and ensure competition in the market, many consumers will continue to buy poor value Gap Insurance from motor dealers, as they have no idea it can be purchased elsewhere.
Although it does seem that the message is slowly getting out, and perhaps some of the greedier motor dealers may change their ways.