Remaining Gap providers told to pause sales of product by FCA

The FCA has revealed that it has told the remaining providers of guaranteed asset protection (Gap) insurance to pause sales of the product.

Last month (9 February 2024), the regulator announced that 80% of the Gap market would be suspending sales after feeling that it was failing to provide fair value to some consumers.

In an update today (4 March 2023), the FCA said it had sent further requests to the remaining providers to pause sales of the product.

The suspension will take effect from the end of March 2024.

“Following our agreement with the largest Gap providers last month, we have sent further requests to the remaining providers to pause sales of Gap insurance,” an FCA spokesperson said.

“Gap insurance can provide a useful service to customers, but in its current form it does not offer fair value and we want to see improvements. 

“We are working closely with Gap insurers to resolve these issues as quickly as possible, so that customers can access fair value products that meet their needs.”

Actions

The FCA also noted that it was aware of the impact this would have on customers who may wish to purchase new Gap insurance policies.

“We do not intend to completely restrict the ability of customers to purchase Gap or ban Gap as a product line,” the regulator said.

It expects the firms involved in the first round of action to address concerns in a timely manner prior to any pause in sales for the remaining firms coming into effect at the end of March 2024.

“We stand ready to review firms’ revised proposals as soon as possible, with the view to resolving these issues,” the FCA said.

“We will consider firms’ proposals for different distribution channels and we recognise that some distribution channels may be able to address these concerns more quickly.”

Consumer Duty

Gap insurance covers the difference between a vehicle’s purchase price or outstanding finance and its current market value, in the event it is written off before finance has been repaid.

Back in September 2023, the FCA warned Gap insurers that the product was unlikely to be providing fair value to customers and wrote to providers asking them to take immediate action.

It came after new regulations introduced by the FCA mean a service driven market centred around fair value is more important than ever.

For example, its Consumer Duty regulation, which was introduced on 31 July 2023, sets out updated regulations that firms must follow.

Essentially, it requires insurance firms to review their products and services against a new standard of fairness.

Speaking in September, Matt Brewis, director of insurance at the FCA, said its warnings over Gap insurance was “an early signal of the work we’ll be doing under the Consumer Duty.

“Customers should be reassured that we’re in their corner and are taking action where we see poor value being provided,” he added.

“If the firms are unable to prove they’re providing fair value to their customers, they should expect further action from the regulator.”