’We’re disappointed with the market’s response to our warnings,’ says regulator
The FCA has stressed it is not banning guaranteed asset protection (Gap) as a product line after issuing providers with a fair value warning.
The regulator has written to several firms manufacturing Gap insurance to set out its concerns over the value their products offer to customers.
It also issued such providers an ultimatum – take immediate action, or it will intervene.
Following this, Car Dealer Magazine claimed that several car dealer sources were told by providers that the product could be “banned” as early as February.
However, the FCA has stressed that this is not the case – and it has also expressed disappointment in the reaction of the market to its clamp down.
“We’re disappointed with the market’s response to our warnings to improve the value of Gap insurance for customers,” a spokesperson told Insurance Times.
“We have told firms to take immediate action to show how customers are getting a fair deal or we will intervene.
“We have no intention of banning Gap insurance as a product line.”
Warning
Gap insurance is an add-on to motor insurance and covers the difference between a vehicle’s purchase price and its current market value.
Read: FCA to clamp down on ‘outliers’ in cyber insurance market
Read: Increased upheld FOS complaints ‘does not exactly scream fair value’
Explore more motor-related content here or discover other news stories here
The FCA’s warning about Gap insurance came after its data showed that there had been cases where only 6% of the amount customers paid in premiums was paid out in claims.
And it had also seen examples of some firms paying out up to 70% of the value of insurance premiums in commission to parties in the distribution chain, such as motor dealerships.
Matt Brewis, director of insurance at the FCA, said its warning was an early signal of the work “we’ll be doing under the Consumer Duty”.
Introduced last year (31 July 2023), the regulations require insurance firms to review their products and services against a new standard of fairness.
“Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided,” Brewis said.
“If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.”
His career began in 2019, when he joined a local north London newspaper after graduating from the University of Sheffield with a first-class honours degree in journalism.
He took up the position of deputy news editor at Insurance Times in March 2023, before being promoted to his current role in May 2024.View full Profile
Hosted by comedian and actor Tom Allen, 34 Gold, 23 Silver and 22 Bronze awards were handed out across an amazing 34 categories recognising brilliance and innovation right across the breadth of UK general insurance.
No comments yet