The much anticipated FCA report on the sales of General Insurance products, such as Gap Insurance, has caused much debate in both motor dealer and insurance retailer circles. The initial findings of the FCA included the statement that competition in the market was not working well, and that some products currently offer ‘poor value’ to consumers, with the FCA seemingly determined that this situation must change.

As part of due process, the FCA have been consulting all interested parties regarding the Gap Insurance market. This has included motor dealers, insurers and around 1000 consumers who have recently bought a new vehicle from a motor dealer. From this last group some interesting details have emerged, including;

  • Many consumers were not aware that they could have bought Gap Insurance independently, away from the motor dealer
  • Two thirds could not accurately remember how much they had paid the motor dealer for Gap cover
  • One fifth could not even remember buying the Gap Insurance at all

Quite worrying statistics that do not make good reading. This may suggest it could be apt for the FCA to send in ‘mystery shop’ consumers to discover just what sales processes are being employed that result in consumers not even being aware they had bought the product? Perhaps an argument for another time.

The FCA have entered into a period of discussion with all interested participants in the market, and of course this is only right and proper. One suggested change has been to introduce a ‘deferred’ period that motor dealers must allow between offering the Gap Insurance product, and then actually concluding the sale of it a few days later. This would allow consumers time to consider all their options before committing to the motor dealer product.

Seems reasonable? Well motor dealers think that they already have enough safeguards in place due to the extension of the ‘cooling off’ period from 14 to 30 days. This, it has been suggested, gives the consumer ample time to consider and change their mind on the motor dealers product if they wish.

However with so many car buyers seemingly unaware that they had even bought Gap Insurance from the dealer, how does this really help?

Ongoing talks have taken place between the FCA and interested parties. Whilst no further official comments are due for some time, it is our understanding that no definite changes may be made for at least another twelve months. It may appear that the FCA may provide more interim findings, suggest possible solutions and enter into at least one further period of consultation before definite rules changes are put in place. Gap Insurance

We also understand that the FCA has shown some concern into the ‘supply chain’ of products such as Gap Insurance, into retailers such as motor dealers, with the aim of reducing the overall end premium charge by those dealers. It will be interesting to see how this is approached, as currently the largest proportion of the end premium is often the motor dealers commission.

Whilst it is disappointing that the process of changing the way in which Gap Insurance is sold may not be addressed sooner, it can only be hoped that the FCA find a mechanism to improve consumer awareness of the market options. This ultimate goal, if achieved, can only be good news for the car buyers of the UK.

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