Despite Guaranteed Asset Protection (GAP) Insurance being reinstated as a key customer proposition for retailers, Intelligent Motoring estimates that 90% of dealers are not actively promoting it.
The Financial Conduct Authority (FCA) has previously said its scrutiny has improved transparency and value for consumers, driving renewed interest in GAP Insurance. According to Intelligent Motoring, consumer confidence in the product is growing, benefiting both its retail partners and its direct-to-consumer platform, MotorEasy.
Go deeper with GlobalData
Duncan McClure Fisher, CEO of Intelligent Motoring, highlighted the importance of GAP Insurance as vehicle values stabilise post-pandemic and electric vehicle residuals decline. “Claim payouts are regularly exceeding £20,000 to £30,000, demonstrating the critical protection GAP Insurance provides,” he said. “Many retailers appear hesitant to sell the product, with only around one in ten advertising it to customers. This may be due to increased net rates and capped retail premiums, but flexible solutions exist to ensure fair value products that protect consumers, foster customer loyalty, and generate revenue.”
The FCA’s review reinforced the need for transparency, compliance, and customer-focused sales strategies. During the temporary suspension of sales, some retailers adapted by offering alternative value-added products such as Cosmetic, Tyre, and Battery Insurance or Insured Breakdown Recovery. Now, as GAP Insurance sales resume, retailers have an opportunity to reintegrate the product into their offerings.
McClure Fisher noted that some consumers had delayed purchasing a vehicle until GAP Insurance became available again, indicating strong demand. “Retailers hesitant to reintroduce GAP Insurance should seize this opportunity,” he urged. “Careful pricing, effective compliance measures, and seamless integration into the sales process will enable them to confidently offer a GAP Insurance programme that benefits both consumers and their business.”
GAP insurance covers the difference between a car’s market value at the time of loss and the amount owed on finance or lease agreements. In the event of theft or a total write-off, standard motor insurance typically only reimburses the current market value, which can leave buyers with a financial shortfall. GAP Insurance is particularly valuable for retail buyers financing a vehicle purchase, as it ensures they are not left with outstanding payments beyond the insurance payout.
The FCA announced a pause in GAP Insurance sales in February 2024 as part of a review into fair value, before allowing sales to resume in July 2024.
