Context
In 2022, the FCA’s value measures data showed there were over 2.4 million Guaranteed Asset Protection (GAP) insurance policies in force. This data identified that only 6% of the amount customers paid in premiums for GAP was paid out in claims, with some firms paying out as much as 70% of the value of insurance premiums in commission to parties involved in selling GAP.
In February the FCA announced that multiple insurance firms had agreed to pause sales of GAP, following a request from the regulator. This was followed by a second tranche of engagement in March with the rest of the market.
Key points to note and next actions
Following action from the FCA, some firms have now been permitted to recommence sales of GAP. In order for the FCA to permit firms to restart sales of GAP, they have been required to demonstrate their GAP products provide fair value to customers, in line with the FCA’s rules. Firms that have resumed sales have done so with materially lower levels of commission being paid out to those selling GAP, which has improved value for customers. Those firms are:
- Fortegra Europe Insurance Company Ltd
- Motors Insurance Company Ltd
- Amtrust Europe Ltd
- Financial & Legal Insurance Company Limited
Following this action, customers purchasing GAP insurance can expect to receive better value cover which is suited to their needs, and receive better outcomes.
Sheldon Mills, FCA Executive Director of Consumers and Competition, said: “We took action when our data showed that customers were not getting a fair deal. 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.”
The FCA will continue to consider the remaining firms’ proposals to improve value for customers.
The FCA reminds firms that, under the Consumer Duty, they must provide fair value to customers; ensure products and services meet their needs; and provide good customer service.