The Financial Conduct Authority (FCA) has authorised several firms to restart selling Guaranteed Asset Protection (GAP) insurance following regulatory action aimed at enhancing fair value for customers.
To resume sales, firms had to demonstrate that their GAP insurance products comply with FCA rules and provide fair value to customers. This regulatory intervention has resulted in significantly lower commission levels for those selling GAP insurance, thereby improving the value for customers.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, 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.”
In February, the FCA announced that multiple insurance firms had agreed to pause sales of GAP insurance following a request from the regulator. This was followed by further engagement in March with the remaining firms in the market.
According to the FCA’s 2022 value measures data, there were over 2.4 million GAP policies in force. However, only 6% of the premiums paid by customers were paid out in claims, with some firms paying up to 70% of the insurance premium value in commissions to parties involved in selling GAP insurance.
The FCA has now given the green light for the following firms to recommence selling GAP insurance:
- Fortegra Europe Insurance Company Ltd
- Motors Insurance Company Ltd
- Amtrust Europe Ltd
- Financial & Legal Insurance Company Limited
FCA directs top insurers to halt GAP insurance sales for thorough review
