The Financial Conduct Authority (FCA) has allowed several firms to recommence sales of Guaranteed Asset Protection (GAP) insurance after implementing measures to ensure better value for customers.
To resume sales, firms must show that their GAP insurance products comply with FCA standards for providing fair value. The firms that have restarted sales have significantly reduced commission levels for sellers, thereby enhancing the value proposition for customers.
Customers buying GAP insurance now can expect more value-oriented coverage tailored to their needs, leading to improved customer outcomes.
“We took action when our data showed that customers were not getting a fair deal,” said Sheldon Mills, executive director of consumers and competition at the FCA. “I’m pleased that, following constructive engagement with industry, a significant proportion of the market is now able to restart sales.
“GAP insurance can provide a useful service to customers and we continue to work with the rest of the market to address our concerns.”
In February, the FCA reported that multiple insurance firms had agreed to pause their GAP insurance sales following a regulatory request. A subsequent round of engagement occurred in March with additional firms.
The FCA’s 2022 value measures data revealed that more than 2.4 million GAP policies were active. This data indicated that only 6% of the premiums collected for GAP insurance were paid out in claims, with some firms directing up to 70% of the premiums to commissions for selling the insurance.
The FCA is still assessing proposals from other firms to improve customer value. According to the Consumer Duty, firms must ensure their products provide fair value, cater to customer needs, and offer satisfactory customer service.
The FCA has approved the following firms to restart selling GAP insurance:
The FCA’s decision to allow these firms to resume sales is based on its current evaluation, and the regulator expects firms to continually assess and adjust their products to maintain fair value for customers.
The FCA is currently under flak over its proposal to announce regulatory investigations before making decisions.
